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Moneycorp Dealer Market Commentary

Despite seeing positive data releases for the UK over the past few weeks, with Construction PMI (Purchasing Managers Index) being released last Tuesday 4th October above estimate, as well as the Services PMI on Wednesday 6th Octover, again above estimate. Sterling is struggling to make any upside gains as the risk of a ‘Hard Brexit’ hangs as a dark cloud above the UK economy and this fear being the main driver on Sterling for the time being.

The markets are displaying a high level of resistance against any gains for Sterling, with the technical retracements following a sharp sell-off in a currency not being as dramatic or holding as with previous movements, with 1.2476 being a strong resistance level following the ‘flash crash’. These small retracements higher are acting as an opportunity to send Sterling lower and for traders to re-enter as sellers of the pound with support in currency pair now being found at 1.2200, keeping us in a tight 2.75 cent range.

As per the currency forecasts below, it is only HSBC which is close to current market levels and ‘market chatter’ indicates we could be at 1.1500 by year end, dependent on a few key factors; the US Presidential election result, continued strong data releases from the US (in terms of their employment data and CPI target of 2%) as well as their potential to raise interest rates in December, exactly a year after their first interest rate since the 2008 financial crisis.

A Clinton victory, continued strong employment data in Non-Farm Payrolls and CPI (Consumer Price Inflation) data above their 2.0% YoY target (currently 2.3% YoY) will give the US enough fodder to raise interest rates in December, following market predictions being pushed back through August, September and now to December (now at 70.2% from 63.9% pre the Non-Farm Payrolls released Friday 7th October). However, this is still very much election dependent and we await the US Federal Open Market Committee meeting this evening to give us further indication of Yellen’s plans for the US economy.

GBPUSD

 

Q3 16

Q4 16

Q1 17

Q2 17

2017

2018

2019

2020

Bank of America Merrill Lynch

1.29

1.29

1.26

1.31

1.31

Barclays

1.27

1.28

1.30

1.32

1.36

1.54

1.55

1.56

Citigroup

1.29

1.29

1.29

1.29

1.30

HSBC Holdings

1.20

1.15

1.15

1.12

1.10

JPMorgan Chase

1.32

1.33

1.33

1.33

1.58

Lloyds Bank Commercial Banking

1.30

1.32

1.34

1.35

1.36

Morgan Stanley

1.26

1.27

1.31

1.33

1.35

Royal Bank of Scotland

1.30

1.34

1.36

1.36

UBS

1.29

1.20

High

1.32

1.34

1.36

1.36

1.58

1.54

1.55

1.56

Low

1.20

1.15

1.15

1.12

1.10

1.54

1.55

1.56

 

 

 

 

 

 

 

 

 

Average

1.28

1.28

1.29

1.30

1.32

1.54

1.55

1.56

Median

1.29

1.29

1.31

1.33

1.33

1.54

1.55

1.56

 

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