Weekly Market Report 22/01/18


A good week for Sterling saw the currency hit its highest price against the USD reaching 1.3945. This is the highest ‘cable’ has been since ‘Brexit’ was announced in 2016. The pair did drop sharply and reverted to 1.3839 at the close of play on Friday as key resistance levels were met. GBP also found favour against its other major counterparts hitting highs against the Euro of 1.1353 (0.8808). As news of a softer Brexit seemed to be echoing around as investors have deemed the market impact to be substantially less, which has buoyed GBP over the last week. Although the saga (Brexit) is far from over we believe that this small rally will continue strongly into this week.


The European Central bank will stop printing money by the end of 2018 as Draghi looks to target inflation. Interest rates will remain at record lows during the course of this year, but sources claim the Eurozone will be at 0% by the end of 2019. The EUR has strengthened against the dollar substantially over the last month recording over 1.23 last week against the Greenback. This strength is based on EU growth which remains strong and will continue to grow throughout the year. Euro strength will be one of the challenges the central bank needs to deal with as a stronger currency tends to dampen inflation by making exports dearer and imports cheaper. Inflation is not expected to reach the ECB’s target until 2020 at least…


A poor start to 2018 has seen the Dollar lose ground against all major counterparts, with a government shutdown now in place it seems we will continue to see the slump well into February. A psychological resistance level at 1.40 against sterling will be tested severely this week as billions of USD will be wiped off due to the chaos in the senate. The inability of congress to reach a deal to resolve the status of 700,000 undocumented migrants (who are all children) has caused more anger and hatred towards President Trump.


It looks like another momentous week for GBP sellers as buying opportunities vs the majors will be very attractive. For clients who are still not in a position to move but would like to take advantage of the rate; we can offer short/long term forward contracts which will allow one to lock in prices now for future use.


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