For all those affected by this currency pair the tendency is to focus on GBP and its changing daily/hourly strength or weakness due to the torrid action in Westminster. As perceptions that a NoDeal is out of the picture, GBP strengthens and then as news emerges that PM May and Leader of the Opposition Corbyn find no common ground other than their well recorded mutual antipathy, GBP weakens. Volatility in a narrow range as reported here last week. Outside in the wider world USD currency traders, Chicago Mercantile Exchange Futures traders and the market community that tracks the EUR see no reason to buy the EUR at present: Germany economic releases reflect a weak and a further weakening position; Eurozone growth is flat; French unemployment is high and not shifting downwards etc etc etc. Net short EUR trades on the Chicago Mercantile Exchange increased last week by $2.6billion and now total EUR positions stand at $13.9 billion short. While this is a small part of the $5 trillion per day global foreign exchange market, it is nevertheless representative of overall market sentiment: there is no good reason to buy EUR at the moment. In summary that means that despite the Brexit negotiations’ negativity of Westminster and Brussels, GBP is insulated from much larger dips by the ongoing greater negativity for EUR…..for the moment.
Hard on the heels of the news that Goldman Sachs no longer requires Masters of the Universe and in fact all staff to wear suits, comes the news that a City Law firm partner told the audience to avoid brown shoes with a blue suit. Quite takes me back in time to 1992 when one of my colleagues had rashly cut a dash by wearing a tie, blazer, dark grey trousers and brown shoes for the morning Executive Directors’ Meeting. Looking him up and down my then Investment Bank CEO with a raised eyebrow, said: “ Good of you to come in while you are on holiday.”
Discussion and Analysis by Humphrey Percy, Chairman and Founder