A holistic view is the right view
GBP weakness has been the go to story for currency markets since last year, as the G10 currency pair of GBP/USD trades more like an emerging market currency pair these days. It posted its best daily performance in over 23 years last week in a rally which saw Wall Street analysts claim a ‘normality’ around 1.26 could develop or even a push to 1.28. As we cheered for GBP, we wept for the FTSE, with 2017 continuing to show signs of fatigue and nervousness clouded by a backdrop of uncertainty. As an ex currency sales-trader, my clients at Krzana are intrigued at my take on the FX market in it’s current state.
As in any battle there are winners and losers. The winners call me wondering how long this dream scenario will last – where their goods become more competitive abroad, exports thrive and overseas revenue continues to spike. On the flip side, concerns of inflation, rising costs of importing raw materials and reduction in capital flows creates anxiety. These ‘winners’ are simultaneously being slapped with the risks that impact the losers. The common theme inside both of these camps is geopolitical risk, uncertainty and volatility. So, transparency and knowledge becomes paramount.
Whichever camp you reside in, the takeaway is you needing a tool which provides you with a solid view of the world and market moving events which impact your business and competitors directly. The man who took his Twitter following from 2 million followers to 19 million and barged his way to presidency in the US, arguably has the world at his fingertips. During and post Friday’s inauguration speech, traders became increasingly bearish on Trump’s rhetoric and lack of depth around fiscal policy, deregulation, tax cuts and infrastructure spending. The market didn’t feel reassured and rightly so. Today, he pulled out of the TPP trade deal with multiple Asian countries and whack went USD across the board. Combative, protectionist or isolationist, however; you characterise his speech, what he says matters to currencies, which matters to business decisions, hiring decisions, investment plans, your bonus… get my drift?
Many of our clients are increasingly using our ‘MEP’ functionality to focus meticulously on data around geo-political events which impact them. We have the Twitter handles and digital footprint of major politicians and search their movements and comments against whatever you care about. The return on investment is simple – be proactive rather than reactive.
Written as of Monday 23rd January at 6pm.