It was yet another strong week for GBPUSD as we saw exchange rates fly above the 1.31 handle for the first time since January. Surprisingly enough, this had nothing to do with Sterling Strength, but Dollar weakness- the Dollar index had been dropping for the last 10 days, and the best way to reflect this trade was going long on GBPUSD. Naturally, on Friday, we saw some end of month profit-taking, pushing the exchange rate down to 1.3070- which was to be expected after a 5% move over the last 2 weeks. GBPEUR also saw some action as it jumped to the 1.11 area on Friday after being as low as 1.08 just a week ago- so many great opportunities were available for Sterling sellers.

Even though Sterling has had a good month (primarily against USD & CAD), It seems investors are still bearish on the Pound, this could be for a number of reasons- maybe they missed their chance to make money on this move, or they are worried about Brexit risks returning in August- both of which probably have a part to play in my opinion- but we are in unprecedented times, and right now, the trend is your friend- betting against the market has proved to be very expensive.

As we are entering a new month- there are various factors we need to consider to give us an idea of what to expect next for Sterling exchange rates;

  • Coronavirus cases seem to be growing again in the U.S, Some parts of Europe & the UK.
  • Due to the above, regional lockdowns seem to be happening again- the U.K’s tone seems to very cautious on reopening the economy which is now indicating more lockdowns regionally, or even another National lockdown in a worst-case scenario. (Take that with a heavy pinch of salt).
  • U.S Election- things seem to be heating up, Joe Biden seems to be leading the polls in certain areas, but his success may heavily rely upon who he picks as his VP candidate.
  • Central banks- We are not expecting rates to go up anywhere, but any more interest rate cuts or QE could have a major impact on prospective currencies, especially if we hear talk of negative interest rates.
  • Economic Data- Now economies are re-opening, all eyes are on consumer spending and jobs- we have started to see redundancies happen across the board, and the UK Government is using schemes such as “Eat out to help out” to boost spending- and with new quarantine rules, it seems much of the money will be spent here in the UK by the British consumer.

As far as this week is concerned- here are the releases I will be watching for which could either support or hinder Sterling exchange rates;

  • Monday- UK CIPS Manufacturing PMI (Purchasing Managers Index)
  • Monday- US Markit Manufacturing PMI
  • Thursday- Bank of England interest rate decision and inflation report.
  • Thursday- U.S Jobless claims (Continuing and initial)
  • Friday- RBA (Australia) statement on Monetary policy.
  • Friday- U.S – Non Farm Payrolls (Jobs) Data.

Overall, I am expecting quite a busy week on the market, so if you have an upcoming transfer on a particular currency pair and would like to look at options to hedge yourself- please don’t hesitate to contact me.