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ACM Update Tuesday 17th November 2020

Markets rose on the Covid vaccine news although optimism has been replaced with measured realism. Expect a bumpy ride for markets going into the festive season.

Sterling/Dollar has broken through 1.32 the figure on the back of a potential Brexit deal by next week. I believe a deal will get done – whether that is next week remains to be seen. If you have a requirement to purchase USD from GBP consider covering off some of your exposure on a SPOT basis. You can view the recent movements in the graph below –

I expect Brexit optimism to continue so there might be further upside in Cable (GBP/USD). Couple this with America battling soaring Coronavirus infections and imposing restrictions in numerous states then the Dollar may come under pressure. Please speak to a member of the trading department to discuss technical levels to aim for over the coming weeks. By implementing a take profit order you can take advantage of movements on a 24 hour basis.

The Bank of England Governor, Andrew Bailey, provided commentary today stating that QE can prevent “unwarranted tightening in financial conditions”. He also noted the encouraging news on the vaccine front and the need to focus on how our economies will look in the future. Cable (GBP/USD) edged higher and is up just under 0.5% on the day.

Turning our attention to the US we have The Fed Chairperson Jerome Powell speaking later this afternoon. Will the Federal Reserve increase US Government debt purchases to fight the economic turbulence from the escalating Coronavirus cases? Investors will be seeing if they can get a handle on whether the Fed will act to ride out the coming months before a vaccine becomes available. This commentary will move the markets.

On the Sterling/Euro front we are now settled in the 1.11’s. You can view movements in the graph below –

Sterling will of course be a beneficiary of any Brexit deal and should trade higher although the single currency will also gain from a modicum of stability. This will temper any sustained break higher for GBP/EUR. If you have a requirement to purchase EUR from GBP get in touch with the trading team and they can discuss your specific requirements in detail. Implementing a strategy for your FX exposure now ahead of any Brexit news may provide you with percentage point gains and savings. If you would like to discuss things directly with me please let me know.

Cornonavirus and Brexit will of course continue to dominate the headlines. Markets can move suddenly in these extraordinary times so please make sure you have chatted through your options with the team to mitigate your currency risk going into end of Q4 ’20 and Q1 ’21.

If you have any questions please let me know.

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.

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