Sterling saw it’s 3rd week of declines by the end of the week as risks entered the market again- concerns about the U.S-China trade deal, coronavirus, and the UK trade deals with the EU & Japan got priced in again before market close which has put Sterling on the back foot for this week.
The main movers we saw are below;
GBPEUR- 1.1080- 1.0990
At these levels- the current expectations are that GBPEUR will see 1.08 next, GBPUSD will see 1.21, and GBPNZD will see sub 1.90 soon enough. We are expecting a similar pattern for GBPAUD to enter the 1.78 area before any meaningful rise.
The first thing to watch out for on Monday is if the UK Government decide to retighten the lockdown of Leicester, as they have started to see a rise of new infections- if we see this, I do expect Sterling to fall as it would indicate that maybe the UK eased restrictions too early. We have seen the same happen around the U.S in states like Texas where the lockdown has had to be reinstated due to a rise of cases.
The next thing we have on our plate is Brexit negotiations; more intensified talks will begin on Monday, and the UK negotiating team has indicated that they will be sticking with their stance on fishing rights and other issues- so far this hasn’t worked, so I am unsure whether we will suddenly see a spark of positivity from these talks- but you never know- any sign that talks are a little more constructive could reverse the recent decline we have seen in Sterling.
Before we wrap up, I would like to point out that Sterling is now being considered to be the same as an emerging market currency- in the sense that every Sterling cross is now a risky pair- so when the markets see a rise in coronavirus cases, they are “risk-off” and will sell off a risky asset like GBP, and as the market improves they will be “risk-on”, meaning they will happily bet on currencies like GBP to appreciate.
Generally, I am not expecting a sharp break down for Sterling again this year (as we saw in March), but expectations through this year are still negative and I am still bearish on Sterling for now, at least until some of the uncertainty that I wrote about above is cleared up.
As economies are going back to business, properties are selling again, it has never been more important to have a currency plan ready to navigate the markets- those of you who took advantage of these strategies in January I am sure are not as worried, but for those of you who are looking at forecasts and wondering how you can mitigate the FX risk- please don’t hesitate to get in contact so we can add a strategy which will give you peace of mind, and bring cost-effectiveness back into the fold.