ACM Update 06-06-22
What a fantastic Platinum Jubilee over the past 4 days. Some positivity and celebration were much needed for the UK. Sadly, I don’t see any of that translating to the weather or indeed the embattled Pound Sterling.
GBP finished last week down nearly two cents against the Dollar trading around 1.2470. This took it back to levels seen in early May. You can view the recent movements in the graph below –
A week is a long time in politics they say. The Prime Minister must be feeling rather aged of late. A confidence vote will go ahead today at 6pm UK time after at least 54 Conservative MPs requested it. For the Prime Minister to stand down at least 180 Conservative MP’s must vote against him. I don’t think he will be made to stand down. The higher the number the more the political disunity continues. It impacts UK PLC getting out of second gear and getting on with the important tasks at hand.
From a GBP perspective, as alluded to above, I only see a downside bias for GBP. A strengthening US Dollar will leave Cable (GBP/USD) with limited upside potential. Indeed, we had a better-than-expected NFP (Non-Farm Payroll) figure released on Friday with an additional 390K jobs added in May against expectations of a print of 325K.
If you hold USD and need to move into GBP contact the dealing team at Aston whom will be able to guide you through likely scenarios and levels to aim for in upcoming trading sessions.
In terms of Sterling/Euro we had a retracement lower to around 1.1650 last week. We are up slightly in Monday’s session to just under 1.17 the figure. You can view the movements in the graph below –
Short-term direction on GBP/EUR will likely be shaped by Euro headlines this week. Inflation isn’t just a UK issue. Eurozone inflation is sitting at 8.1%. The main action this week is on Thursday when we have the EU rate decision and Monetary Policy Statement. The ECB President, Christine Lagarde, has indicated that the ECB is finally looking at an interest rate rise in July in the form of a 25-basis point move. Some would argue she is slightly late to the party. Perhaps she thinks inflation is still ‘transitory’.
Will the ECB bring forward their projected 25 basis point move? Will the ECB take a more bullish approach and raise by 50 basis points? Or will they keep to their playbook and raise in July? There is some uncertainty around what will happen so if you have GBP/EUR exposure please get in touch with a member of the Aston team to discuss your specific requirements.
Have a fantastic week