Happy new year everyone! Now everything seems to be getting back to normal- I feel now is a good time to start pinpointing key events coming up for the major currencies. Last year was a pretty bleak year for the Pound, many would say because of Brexit, however, the real weakness actually came from the snap election called by Theresa May, and the Pound just hasn’t been able to recover since. Of course, Brexit is still a key element leading up to 2019, however, I am sure I speak for all of us when I say that nobody seems to know what is going on, so I don’t see any reason why that would be reflecting positively on the Pound- hopefully this year we manage to get some information that helps us!

In reference to the Pound, if you have been watching the markets you’ll see that the GBPUSD exchange rate has held up pretty well, while the GBPEUR has been sliding since markets reopened in 2018. The reason for this seems pretty clear- many traders are calling for the U.S Dollar to weaken this year, this is due to inflationary pressures and uncertainty to do with their economy- which could help the GBPUSD exchange rate reach 1.40- the reason why I can’t see it flying beyond this is because I feel the UK economy and Brexit uncertainties will hold the Pound down. There is also the fact that the U.S will continue with interest rate hikes in 2018, which should keep the Dollar relatively strong.

The Euro is the currency to watch this year- it is been pretty weak across the board for the last few years (This has been forgotten due to recent events involving the Pound) but as their economy pretty much bottomed out- there is really only one way for things to go in Europe now. QE has been cut as of last week, and an interest rate hike is expected this year- this is a very bullish signal for the EU economy and I can see the EURUSD at 1.25 or beyond relatively soon. It seems that investors will be using the EUR & CHF as safe havens this year as opposed to the U.S Dollar. If you are trading GBPEUR, this isn’t great news- the rates are already pretty low, but there isn’t much liquidity in the market for the Pound at the moment, we are trading at 1.12 currently, and I feel if we drop to 1.11 there may be a lot of buyers at that level-  I don’t see this currency pair dropping through the floor but this year levels of 1.13-1.14 will probably be pretty good rates to average in at if you are buying or selling.

The UK economy will be a big focus in 2018, inflation has been rising, wages are still low, and all eyes are on the Bank of England for another interest rate hike later on this year- if you are selling Sterling then it would be wise to hedge yourself correctly this year as we are prone to sharp movements due to Brexit headlines (This is due to algorithmic traders picking up on key words in the news and then hitting the sell button)- and the only way to protect yourself is by using financial tools such as market orders and forward contracts. If you would like to review your annual requirements please don’t hesitate to contact me so we can arrange a time to go through your exposure and find ways to protect your margins- the most important thing is to mitigate your exposure for your peace of mind, which is something I have been doing for my clients for over 6 years.