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September 2017

Sterling back to 2016 level against USD

Published: Monday 18 September 2017

  • Sterling back to 2016 level against USD
  • USD weaker across the board
  • Central Banks dominate the week
By Charlie Horsley
 
 
There are always things you would love to see but never will. The one that stands out from the weekend for me is that I would love to have seen the smile on Lewis Hamilton’s face as three of the cars in front of him on the grid in Singapore crashed out of the race on the first corner.
 
I know a lot of people would also like to see the Bank of England (BoE) raise interest rates, but it looks like they will have to wait until November, or maybe a bit later, despite the comments from the Governor of the BoE last week. Mark Carney may have hinted at rate hikes, but there’s many a slip twixt cup and lip, as someone used to say. Nonetheless, the Pound has rallied on the hint of higher yields. It is back to levels not seen against the USD since the day after the Brexit vote and is back to July levels against the Euro. It is finding Euro buyers at €1.1350, though. Sterling has broken out of a number of downward trends, so there may well be scope for further GBP gains.
 
The weakness of the US Dollar is also a major feature of the current market. The Euro-USD rate is back up to levels we last saw in December 2014. $1.20 is an obvious psychological barrier but, if the Euro can push above there, the big technical level is the 50% retracement of the move from the 2014 high to the 2017 low and that comes in at $1.22. These are then attractive USD buying levels in the short to medium term. There is so little Eurozone data today that it is unlikely we will see large scale movement in the Euro. That is, unless we get comment from the European Central Bank (ECB) or Brexit related matters rear their head.
 
There is a lot of central bank activity this week; including the Australian, European, UK and US central banks. Any or all of these could be market moving. We will also get a speech from the British Prime Minister on Brexit while she visits Italy on Thursday. That’ll be watched intently.
 
And my favourite story from the weekend is that a flat-earth campaigner, D Marble, believes he has proven that the earth is in fact flat. His proof is that he took a spirit level on a flight and, because the bubble was level the whole time the aeroplane flew around the planet, it proves that there is no curvature. Can anyone spot a flaw in his argument? …anyone?