Good morning

WOW WOW WOW. There is a fire in GBP’s belly.

I wrote in my blog yesterday how I predicted EUR/USD and GBP/USD would fall from 1.3650/1.7150  to 1.3600/1.7100  respectively. That happened alright, but then GBP/USD left the EUR/USD behind and rallied back all the way to 1.7150 leaving EUR/GBP the ultimate winner FINALLY (as I predicted) breaking the psychological 0.7950 level. Currently trading at 0.7925 this represents another crucial level for EUR/GBP and a close under this level opens up 0.7850-75 as the next big trigger point. This is a monumental move, make no mistake.

What is interesting to note at this point is how the FX vol (options) market has reacted, or in this case NOT!! 1m EUR/USD LOWER at the open quoted 4.05/4.35 and the 1y 5.85/6.05 (curve steepening), GBP/USD 1m 4.30/4.50, 1y 6.20/6.45 and EUR/GBP 1m 4.20/4.35, 1y 6.20/6.35. If you follow the vol market like I do you will know that this fall (remember it is a US holiday today and there is the “weekend roll” effect, still the extra 1/10 of a vol still leads me to believe that overall the options market is probably LONG overall and thus happy to offer vol out to cover their positions. That and the summer holidays and the complete lack of volatility overall (THANKS YOU CB Governors) leaves the options market at their all time lows (and making news lows daily).

EUR/USD needs to break 1.3500-1.3475 for us to see a change in vol sentiment. Until that happens be rest assured, things are likely to stay the way they are and anyone long vol/gamma will be hurting (pay theta/decay).  I remember back in 2005 when vols in EUR/USD came down to roughly these levels for the summer. It was a disaster. Traders did not know what to do with themselves and trading revenue collapsed. Welcome back to 2005. Pretty it is not!!

I will repeat what I have said a few times previously. If you are a seller of GBP, buyer of foreign currency you would be well advised to look to hedge a “portion” of your book and lock it is. Having said that in EUR/GBP I have eaten humble pie. While I was confident of a break of 0.7950 I never saw it coming this aggressively.  Then again the NFP number yesterday was AWESOME (+288k vs expected +215k) a number the stock market loved and a number the USD loved. The rest as they say was history.

So what for today, well the US holiday will dampen things somewhat. I expect the USD to continue fighting back (vs the EUR) though I would imagine somewhere behind the scenes the CB’s have other ideas. I would be surprised to see the EUR/USD crack 1.3475/1.3500 over the coming weeks. My gut tells me it is not the right time…but hey I have no crystal ball…

EUR/GBP is a winner through and through. GBP traders love GBP and strong PMI numbers and recent rhetoric of rate hikes reinforces the desire to hold GBP (amongst G7 currencies). So I am of the opinion that the rally vs both the EUR and USD and AUD and JPY (etc) will continue unabated for now. There is some serious firepower behind GBP that much is obvious from the price action we have seen in this week especially.

Have a great weekend, good luck and take care

Good morning

With the impending ECB meeting and conference (thereafter) and NFP out of the US, the FX market is gearing itself ahead of the 4th July holiday tomorrow. While I am not expecting any fireworks from either, I do expect Gov. Draghi to comment on jobs, inflation, interest rates and finally the “strength” of the EUR and perhaps its implications on the Eurozone in general. While it is rare to actually come out and say it out loud, i do nevertheless think there will be some reference to the FX rate and what it implies. For this reason and this reason alone, I think the FX market will be looking to BUY the $ vs the € and the £. I have stated previously I thought it was too early to do this, now I am thinking (especially today and US holiday tomorrow) there will be profit taking today and squaring of positions. In other words I see EUR/USD and GBP/USD going south (EUR/GBP slightly weaker).

I am not shifting stance here. As many traders will agree any US holiday generally means volumes are down and currencies generally trade sideways. There will be many traders squaring up and locking any profit they have away allowing themselves respite and a chance to enjoy the long weekend (hey we traders are human after all).  EUR/£ 1.3660, appears to be ready for a correction perhaps down to the figure, GBP/USD 1.7160 also correcting down to the figure, leaving EUR/GBP pretty much where it is, 0.7960 or slightly weaker to around 0.7975/0.8000 area.

Momentum still strong in EUR/GBP and the expectation is that GBP will continue to make advancements ag the EUR given the better economic growth seen in the UK.  Having said that the market has had a pretty decent move over the past 48 hours so some kind of reversal is generally always welcome and expected (in some way). I still recommend (as an importer) if you are in a position that you need to hedge, you would be well advised to do at least 25% now and lock in these favourable rates.

Overnight, Dovish RBA Gov. Stevens resumes talking the currency down. Speaking this morning in Hobart, Governor Stevens unexpectedly spoke at length on the economy and monetary policy. His main message was that the RBA was comfortable with keeping rates steady for an extended period, while he resumed talking the exchange rate down, warning of a “significant” fall as he made the most expansive comments on the currency. AUD/USD fell from 0.9445 to 0.9360 after the comments. This is a lesson for all CB Governors. Sometimes you need to come out and SAY IT. Not to talk in riddles, just come out and say, hey our currency is to weak/strong and something needs to be done. The market will in turn do that for you. The ECB and Gov. Draghi should say just that. The EUR will collapse and save him the trouble.

I read a great article this morning in the Telegraph newspaper regarding an interview with FED Gov. Yellen and interest rates. Here is the link   http://www.telegraph.co.uk/finance/economics/10941966/Janet-Yellen-interest-rates-the-wrong-tool-to-address-financial-stability-risks.html

This morning Nationwide revealed house prices rising at fastest pace in 27 years. You know what, forget about raising interest rates, instead drop the amount a bank can loan you against your salary (currently 4x), stop cheap rates, and most of all require a minimum of 50% deposit. JOB DONE!!! yes there are certain people who will still be able to afford that, but on the whole how many really. That will stop things in their tracks and slow this housing bubble in one swoop of the wand. Will never happen of course but hey at least when Gov Carney reads my blog he will think…that’s not a bad idea…

Have a great day ahead and good luck

Good morning

Get in there!!! GBP on fire and trending in line with the recent market expectation. How many times over the past 2 weeks have I said (and I am in good company) that as long as the UK outstrips the US and EU, GBP will be in focus and “the one to hold”.

We have opened this morning with UK (and the rest of the world) stocks rallying which in turn is giving GBP a lift. The high so far in GBP/USD has been 1.7182 and in EUR/GBP 0.7949 (1.2580). So for all intents my target of 0.7950 has now been reached, currently trading around 0.7960 as barriers at 0.7950 taken out. I am confident we have not seen the end of this rally, BUT PLEASE KEEP IN MIND BIG DAY TOMORROW there is NFP and ECB (+conference) which could shed some light on the next EUR and USD moves. Given this I expect the spot market to remain glued to the current range unless of course some unsubstantiated rumours start to surface about tomorrows meetings and numbers.

i noted in yesterdays commentary that EUR/USD is reaching levels which the market seeks to enter LONG USD positions. 1.3675/1.3725 is the area that has been touted. While I am happy to go along with this I personally think it might be a little too early to reverse positions and go long USD only because with the summer holidays about to start liquidity will somewhat dry up and moves will be more pronounced. Having said that I think we are likely to see a deeper rally in the EUR and it is not until August-September that I feel will be the “right time” to position for a move to 1.3000….

In GBP, well very hard to position against GBP strength. I do believe and I am sure I am supported on this view, that GBP will in all likelihood shed some recent gains as market makers take profit ahead on the long weekend (4 July) in the US. Tomorrow is likely to see a more pronounced move given the importance of the ECB and NFP events.

Have a good day ahead and good luck

Good morning

As many of you will have read in my previous commentaries over the past few weeks, there is an overall plan to try weaken the USD to a level where it will then be possible to re-enter and initiate LONG USD positions. I have stated previously that 1.3725-1.3750 (€/$) is an area where this appears TO BE THE MAGIC NUMBER. Trading just shy of 1.3700 at the moment and with the ECB and NFP to be published on Thursday it is my belief and opinion that the markets will continue to push ahead especially as there is a press conference after the ECB announcement which usually adds an extra spice to their decision. So for now the trend is your friend and it is worth holding on for additional gains. I do not think we will see a reversal of gains over the past 24 hours especially with these 2 events on Thursday. Additionally having a look at the FX Options vol market, there is nothing there to suggest otherwise and 1m vol remains around 4.4/4.5….continuing to steepen vs the back end (1y 6.10/6.25). Keep in mind while there has been a “decent” move over the past 24 hours this does not mean you should be looking to buy “gamma” because of the limited follow through that’s likely to occur. So the Options market is still happy to be a net seller of front end vol and trade its negative gamma.

The RBA (Australia) left their interest rate unchanged at a record low of 2.5% and repeated its forward guidance of steady rates. As expected, the RBA kept the cash rate steady at a record low of 2.5%, having last cut rates in August 2013. The RBA repeated its forward guidance that “on present indications, the most prudent course is likely to be a period of stability in interest rates”.  The RBA did however reword its complaint about the higher exchange rate, noting that “the exchange rate remains high by historical standards, particularly given the declines in key commodity prices and hence is offering less assistance than it might in achieving balanced growth in the economy”.   The RBA noted firmer growth at the start of the year, but “still expects growth to be a little below trend over the year ahead”.  Growth (GDP) is expected to be between 2.50-3.10% going into 2015. The RBA also mentioned that credit growth is picking up “most recently [for] businesses”, but left it there and made no further comment.

GBP remains “on fire”. How many times have I said how attractive GBP is right now to the FX community. With all the rhetoric of late regarding interest rates and when they likely to start going up, it is no surprise to see GBP so bid (vs USD & EUR). I still think with regards to EUR/GBP, the level to break is now 0.7950/0.7955 (low of 0.7958) if we are (and we will) to see the next leg lower. However as far as I am concerned while GBP/$ remains bid, the catalyst to see the break will therefore come from a weaker €/$. I am confident that these moves will materialise in the coming weeks.

Only yesterday I said to you if you are an importer looking to BUY foreign currency these are GREAT levels to get involved. That synopsis has not changed and I continue to recommend and suggest you take advantage of the GBP strength to AT LEAST PART HEDGE and lock in these levels. The option of course if you are allowed and want to do FX Options is BUY a GBP/USD Risk Reversal.  In this case you would SELL a GBP CALL (best case) and BUY a GBP PUT (worst case). With the risk reversal trading around flat (you do not pay away much vol) you would be able to secure very attractive strikes ALL FOR ZERO COST. The same applies to EUR/GBP though here you are BUYING a EUR CALL (worst case) and SELLING a EUR PUT (best case). This is better value because the risk reversals are currently SKEWED in favour of EUR PUTS so in effect you are “getting paid” to sell the EUR PUTS. Again this is ZERO COST.

I personally am a big fan of Risk Reversals especially to hedge. Let me know (david.rosenberg@parityfx.com) if you need further clarity and I will be happy to help.

So good luck, GO THE GBP!!!!!

Good morning,  hope you had a good weekend

Having spent my entire career in the Financial Markets and witnessed financial events that could only be said happen once in a lifetime, I find the current environment one that leaves people scratching their heads wondering where the next “inspiration” will come from.

Let me put your mind to rest. While I have no input or the like from those in power, I do know one very simple thing. FX markets are driven by the CB’s to a large degree. I say to a large degree because when I have witnessed CB intervention for what ever reason, it is generally doomed to failure purely because at times there is just not enough reserves to take on the market. While intervention is short lived and has the desired effect, after a number of days or even hours, the momentum is lost. Then there is verbal intervention and more importantly “faceless/invisible” intervention. Basically the CB all get together and quietly agree where they want their currency and then use other Organisations/Large Banks to quietly put this in motion.

Where am I going with this, quite simple really. Look at EUR/USD…whats wrong with it? I’ll tell you, the BIG FIGURE!! 1.3655 as I write this is laughable. Not to mention every trader out there is looking to short the EUR from 1.3675/1.3750, I just question why the EUR remains so “strong”. It ain’t  doing the EU any good that’s for sure.  So to accomplish this let’s say hypothetically the FED and ECB agree that while the US get’s back on it’s feet let’s leave the EUR propped up and then when the time is right let the USD fly giving a boost to EU exports (that are so crucial right now). The point I am trying to make is if one study’s the FX Options market you will know that current levels of volatility (all time lows) represents an environment of limited opportunity and trend. The more difficult it is to second guess the move the more stable the currency. The more stable the currency the easier it is for the CB to control the flows. So I salute the CB Governors for doing an exceptional job. They should all be knighted for their contributions economic stability.

This Thursday (3rd July) sees NFP/US Employment report and ECB meeting. Intra week volatility will be buoyed by this especially with vols are critically low levels. Teh market will generally behave like sheet and try ride whatever wave (big/small) to make money. I do not think we will see any “out of the ordinary or shock” numbers on Thursday and therefore remain cautiously optimistic that the EUR will remain trading sideways within a narrow range. 1.3750 is my top. My bottom, well you know what it is…and what it should be.

GBP/USD will in all likelihood follow the EUR but not in as much vigour. This will keep EUR/GBP on the back foot all week before seeing a resumption of the GBP strength.  As I have suggested previously if you are a buyer of Foreign Currency (EUR, USD etc etc) I still think these are very attractive levels. If you can wait as it is not urgent, I think you will get a better opportunity. Then again a bird in the hand is worth 2 in the bush!!!

Have a GREAT week ahead

Good morning

Looks like we are going to end the week with GBP holding onto to recent gains. GBP/USD currently trading at 1.7030 and EUR/GBP at 0.7995. After the roller-coaster week GBP has had, I think there will be a number of GBP traders breathing a sigh of relief. It was touch and go earlier this week when Gov. Carney gave the market a scare and GBP retraced gains, only for his comments yesterday to re-enforce his original comments about rates being hiked in Q4 2014.  I know I might sound like a parrot (repeating myself) but trust me when I say, Gov. Carney and the MPC members will have to think long and hard and be absolutely sure when they raise rates. The last thing they need is to hike rates and see a fall in GDP and contraction in the UK economy. Disaster!!

so my main themes for the coming months are: (1) A stronger USD, (2) A weaker EUR, (3) A Stronger GBP (ag EUR), (4) a weakening of EM currencies, specifically, ZAR, TRY, BRL, MXN, (5) Lower US Treasury prices (in line with a US rate hike), and finally (6) US and UK rate hikes in 2015 (I reckon).

In line with the above, and as we start to see a clearer picture of when rates will likely be hiked, the market will begin to sell the USD treasuries  curve, and at the same time for the USD to outperform other G7 currencies.   Coupled with the drastic actions the ECB is having to take to delivery the much needed policy measures, there is an expectation that all these pieces of the puzzle will start falling into place as soon as September.  I have said that 1.3480 in the EUR is critical and a break will open significant loses thereafter. So if you looking to hedge (buyers of EUR/USD) try hold out for now because chances are you will get a better opportunity. On the other hand, GBP importers (selling GBP buying foreign currency) these are awesome opportunities for you and in my opinion you should be trying to hedge a good proportion of your book now.

If your business requires you to BUY EUR & SELL GBP, again my view is that the GBP will continue to strengthen and so for now if you are able to sit on your hands and withstand any intraday volatility, then try doing so. That is my opinion based on the price action I have seen over the past fortnight. Having said that if you prefer not to wait then hedge up to say 35% of your book and wait on the rest. Having spent many years trading FX Options my philosophy has always been simple, “it is never too early to take profit, purely because I don’t have a crystal ball to second guess the market”.  in plain English, yes there are times when it is good to let your profits run, but there are also times when you have a decent profit which should be locked away.

That’s all for today. Hope you have a magic Friday and a pleasant weekend. See you Monday

Good day, and apologies for the late writing of the Blog.

GBP has mounted an attack. Having been battered yesterday to 1.6950 levels, we have seen a fight back all morning with the GBP currently trading at 1.7028. In my opinion, Gov. Carney is trying to say too much without giving up his hand. He wants to try cool things and prepare the market for the future, but at the same time he is blowing hot and cold. Caught between a rock and a hard place, sometimes the best option is to lay the cards on the table and then keep repeating the same things so as not to give away any other info best kept under wraps. It is for this reason the market is starting to “fall out” with Gov. Carney. They just can’t work out what he is likely to say next.

Take this mornings comments (Financial Stability Report). On June 16 everything rocked, then a few days ago that was all turned on its head when he spoke of the labour market, and today he went one step further and said hold on the biggest risks to Britain’s recovery stem from the housing market and as such introduced measures to limit riskier mortgages and prevent an unsustainable buildup of consumer debt. Let’s be honest for a minute!!! The financial crisis of 2008 was caused by exactly that, housing bubble, mortgage bubble and most importantly consumer debt. Banks were “handing money over” to anyone who wanted it. 100% mortgages, loans, buy to let mortgages you name it people were up to their eye balls in debt. And then like a good pack of cards, it all crumbled into crumbs.

I find it hilarious how some Banks are looking to make up revenue for loses or lower revenue from trading. They not only have to make sure they are fully capitalised according to “Base lII”, but also make available loans to consumers and corporates to rebuild their balance sheets. Put it this way, when last did you go to a Bank for a Loan and walk out smiling?

Gov Carneys actions were  prompted by booming demand for real estate and an increase in high loan-to-income mortgages. Today’s announcement is the boldest effort by a major central bank to actively tackle the threat of an asset bubble and avoid a repeat of the 2008 financial crisis. Carney added, “With recovery in the U.K. gaining momentum, the Bank of England is now focused on turning that recovery in to a durable expansion. Britain has a legacy of high indebtedness that if left unchecked could undermine that durability. The biggest risks relate to the housing market.”

In a separate announcement, the Chancellor announced that mortgages taken out under Help to Buy, a government program guaranteeing loans to people with small down payments, will be capped at 4.5 times income. So now the fun starts. The days of easy money are behind us. It might be “cheap money” but try get your hands on it and you are lucky. My point is people HAVE to cut their cloth according to their means!! It really is that simple.

Back to the markets,  I still hold onto my views that the GBP will appreciate vs its major trading partners (€, $) as the economy continues to outperform its major trading partners. Furthermore I think come Q3, the $ will mount a major move (stronger) ag the € especially and it is for this reason that I suggested looking at doing either ratio calender spreads or straight even ratio calender spreads to take advantage of this.

Last point if you had not seen it already US GDP came out at a woppingly  poor -2.9%.  I guess now you see why I have been going on about the timing of any rate hike and how important it is to GET IT RIGHT the first time

Take care and all the best

Good morning

The Governor of the BOE came out fighting yesterday by “tempering” speculation as to when the UK base rate is likely to rise. After the euphoria at last weeks meeting that rates will have to rise sooner rather than later, Gov. Carney has now sent the Economists and Traders back to their think tanks wondering when this is now likely to happen.

Gov Carney told the Treasury Select Committee that there is some additional spare capacity in the UK labour market that can be absorbed before the need for the base rate to be hiked. He further stated that the timing of the hike is not as important as the fact that any increase in the interest rate will be limited and gradual.

As expected the FX market reacted badly with the GBP/USD falling from 1.7025 to 1.6970, while EUR/GBP weakened from 0.7992 to 0.8025. While many of us will view this as a temporary “glitch” it is still quite significant because for now the “wind has been taken out the sails”. I have no doubt the market was heavily LONG GBP (vs USD and EUR) and the comments caused the traders and the market in general to cut their positions until new information or rumours surface. It would appear that for now there is probably more to come (GBP weakness) before support levels are reached and the market decides these are good levels to re-instate LONG GBP positions.

US GDP numbers to be published at 1.30pm (UK time). Previous was -1.00% and the consensus is for the latest number to come in around -1.70%. So going back to Fed’s Yellen’s comments last week, you can see there are still issues to be resolved before they are in a position to hiking rates. As I have mentioned on a number of occasions, the timing of any rate hike is monumentally important because a hike when the economy is not ready will destroy all the years of good work that has been done (Look to the ECB and their decision making experience).

FX Volatility pretty much unchanged with the options market continuing to see sideways trading over the coming months and thus happy to remain sellers of volatility and earn decay/theta/premium. 1m EUR 4.60/4.80, 1m GBP 4.50/4.80. 1m JPY 4.80/5.20, 1m EUR/GBP 4.55/4.75 all trading near their all time lows. Once again the CB’s have managed to take the spark out the FX market and with it the ability to “manage” their currencies better. Make no mistake, whether it is verbal or actual intervention, CB’s indeed have a very good handle (generally) over the direction their currencies are heading.

Yesterday also saw the German IFO (German Business Confidence) numbers published. 109.70 vs 110.40 (previous) pointing to a slower expansion of manufacturing output and order volume.  This should weigh on the EUR especially as the German economy is the strongest amongst EUR members.  Then again what should happen and what actually happens is very different as we can see by the price action in the EUR/USD. After the number was published, spot fell 10 pips and recovered almost as quickly.

Oil prices, which have remained quite stable in recent years have started to move higher in response to the situation in Iraq. This is likely to result in a phase of higher long term prices and increased volatility. In turn this could result in increased inflation as countries who are net importers of oil are likely to suffer as a result of the shift. Once again the world is being drawn into the religious differences in the M.E. If only Nelson Mandela was still alive and able to help. The greatest statesman I am sure could have helped.

Have a good day ahead

Good morning

Tricky trading conditions my friend.

German IFO just been published at 109.70 from 110.40 last reading. EUR reacted initially by falling 10 pips ONLY.  It has now recovered back to where we opened this morning at 1.3605. As if nothing has happened and yet German confidence has taken a knock!! Who said FX markets were not easy to interpret.

From what I can see I get the feeling the market is looking to take the USD (ag the € and £ especially) higher so that it can then re-enter long USD positions. There seems to be a great deal of talk around this subject now. There is no good reason for the EUR to rally, which tells me the market is hell bent on shorting the EUR, but not “happy” to do this at these levels. If they can muster enough rhetoric the market (they hope) will gradually drift higher giving the market markers the opportunity they are seeking. That of course is the ideal situation though whether it happens is of course another thing completely. Truth is we are trading in such narrow ranges right now, people are looking for any sign to make money.

GBP – The market is waiting for Several members of the MPC (Carney, Bean, Miles to address the treasury select committee from 9.30 am London time to discuss and explain the May Inflation Report. As previously mentioned the market is looking for sign posting towards the timing and size of any rate hike and I would believe that the outcome of this will be GBP positive. GBP volatility has been very low over the past few days but this could be the jump start required to push Cable towards 1.7100 and EURGBP towards 0.7950. After this morning IFO coming out weaker, EUR/GBP seems to have the most potential, looking for the market to breach the downside 0.7950 and break down towards 0.7900-10 and only re-think above 0.8040. Cable support at  1.7000 and 1.6935-40 Resistance at 1.7100 (barrier and retail sellers).

Plainly put the divergent Monetary Policy’s between the ECB and BOE are likely to keep EUR/GBP somewhat offered. The comments at 9.30 are going to be paramount and should reinforce Gov. Carney’s recent comments that the Bank rate will rise sooner than the market expects.

I will write more AFTER the meeting at 9.30am  – Good luck

Good morning, hope you had a good weekend

As I mentioned in some of my @Parityfxplc TWEETS, now that the 2 main CB meetings are out the way, market participants are going to be looking for the next “big story”.  This week economic numbers are on the “soft” side in that other than various European & World PMI (purchasing manufacturers index) and German IFO Business Climate index (prev 110.4 exp 110.2) there is not much else to get excited about. Don’t get me wrong everything that comes out matters, it is just the importance and significance of the number that I refer to.

Gov Carney will be speaking again tomorrow (Tuesday) at 9.30am so we need to keep a watch on that. But let’s face it. What else can he say that we don’t already know.  The reason for my confidence in saying this is if one looks at o/n GBP vols currently being quoted 4.25/7.00 this represents a number that says nothing new expected and no fear factor required. The options market is therefore happy to sell o/n options cheaply as they do not see this as a risky trade. Remember, the higher the volatility number the greater risk the market is applying to that event. So for example the day before the last FOMC meeting, o/n EUR vol was trading around 10% from its normal 3-5%. In other words the market is happy to buy insurance and charge a greater premium if it gets “paid” by the clients.  All in all having come in this morning and taken a look at the vol surfaces across the “actively” traded currency pairs, nothing really stands out. Vol are a touch higher this morning compared to Friday’s close, but the reason for that is the weekend factor (2 days of paying time decay/theta) is taken out the equation.

So what now for the currencies…lets discuss a few

EUR/USD – Once you get to know me and how I think you will know that at times I am like a dog with a bone. I don’t let go, and so once again I will reiterate what I have said before, I really think Q3-Q4 will all be about the USD and I see the currency moving and breaking 1.3000 by year end. Yes, medium term projections but for me to take advantage why not do a calender spread, selling 2x 1-2m VS buying 1x 4-6 months and so leg into the trade. If not 2×1 then how about 1×1, but remember you will have negative gamma but positive theta which in this environments works.

GBP/USD –  trading close to a five year high, and one of stars of the show. GBP has been supported by the recent CB policy outlooks and any aim to try dampen this will fall on deaf ears. You can’t pull the starters gun and then call the racers back half way down the track. Clearly there is shift at the BOE, and they have laid the groundwork for this to prepare us for the inevitable.  Until we hear something from Carney tomorrow I suspect GBP will trade sideways within a tight range. 1.6985 remains key support while 1.7045 remains key resistance. Breaks of either will see an easy 50-75 pip move in that direction.

EUR/GBP – for many people remains a “hot” ticket. Speaking to various GBP traders we all appear to be thinking along the same lines that GBP will rise against the EUR over the coming year. One cannot predict that rise of course but critically 0.7920 0.7850 0.7775 and finally 0.7700 are some of the opinions. I think 0.7920 needs a clean break. Putting the numbers together if we do see 1.3500 (€-$) and say 1.7000 (£-$) that’s equivalent to  0.7940…so I guess you see my point.

Wishing you a great week ahead.