Batten Down the Hatches!
…The Hurricane Season May Have its First Storms on the Way
The Atlantic Hurricane season officially starts June 1st each year but it is normally unlikely to see any real storms until much later in the season. However, it is highly possible we may see some early storms starting this week…at least as far as how they will affect currency rates.
In fact, the argument could be made that the recent terrorist attacks in the U.K. and France were tragically violent precursors to the new-norm….which is nothing can be counted on as being normal. Between fears of terrorism and the political and economic upheaval driving the media headlines, it is amazing that currency exchange rates have not yet burst into flames.
June 8th is what many who trade in the international currency market as well as international economic analysts are referring to as a risk-event laden Thursday. A trio of major events is slated to occur on the same day this week. Many would call it a “perfect storm,” of political intrigue.
In Britain this coming Thursday a new Prime Minister may be elected. Theresa May is still leading in most polls but by the narrowest of margins at this point. No doubt the latest round of terrorist attacks in the U.K. will either add volume to her call to crack down on immigration or undercut confidence in her ability to keep the Empire safe.
On the same day that the U.K. is focused on their national elections, the European Central Bank will be issuing a much anticipated policy decision coming on the heels of its June meeting. Much uncertainty still exists regarding the direction the ECB may take regarding its position on static interest rates.
However, since most current data seems to be trending in the right direction for the EU, it is possible the Bank may shift a neutral position from one of easing rates. Some believe the ECB may actually consider moving towards actually reducing stimulus. Only time will tell what the ECB may choose to do as the latest retail sales data showed no more than a 0.1% rise for the month of April.
Finally, this Thursday will result in the much anticipated testimony of former FBI Director James Comey on Capitol Hill. While conventional wisdom seems to indicate that no likely “bomb shells,” will be dropped during the testimony….the truth is no one really knows how Comey’s testimony will proceed. If by some chance any overly negative fallout from this Hearing drives the headlines of the day…it is to be expected that the dollar will slip even further.
The Bottom Line…
The potential for sudden and explosive volatility exists for major currencies over the coming days. That could spell either good or bad news for the Greenback, Sterling, Euro and others that may occupy this basket of currencies.
As we have already said, the ex-Director of the FBI’s testimony could cause the dollar to slip on troubling comments during the hearings. The Sterling, while currently slightly higher, is still on shaky ground depending on if Ms. May’s Conservative party picks up more seats in Parliament or not and the Euro is in a holding pattern as it waits to see which way the winds blow during the ECB meeting this week.
More than ever, it is imperative that companies that rely on effective foreign currency trading develop strong relationships with currency management entities they can trust. MosaicaFX is one such company that can be counted on to diligently protect your profits and work to provide the most up-to-date data and trending information to our clients.
We would encourage you to make an appointment to speak to one of our Executive Account Managers today to find out what hedging strategies make the most sense for your company and your business model. We look forward to speaking with you today.