Sterling Hits 1.20

Sterling Hits 1.20, can it go any further?

The New Year has brought a further bout of Sterling strength in the currency markets. This strength initially manifested itself in GBP/USD over the festive period as can been seen from the short term chart below – Dec 20th onwards and subsequently filtered through into GBP/EUR – higher Sterling

GBP/EUR has a seasonal tendency to trend in the first couple of months of the year and in this case we are seeing a further extension to the higher trend that emerged at the beginning of last year. There are of course many reasons to be bearish Sterling as a whole, however as it stands, we are potentially seeing a trend higher in Sterling emerge. This trend is not confirmed as of yet and we will be watching a number of indicators over the coming weeks closely – which we will highlight – that should confirm or not the higher GBP/EUR trade.

The first of these sign posts is the big technical level in GBP/EUR at 1.20 – this equates to 0.8333 in EUR/GBP terms. This is a huge psychological level in the currency pair and as can be seen from the longer term chart below, a level we have not been above in over 20 months.

We have made a number of attempts to clear this level since the beginning of the year – each day since the 4th Jan we have hit resistance near 1.20 – see short term GBP/EUR chart below. It is very likely that the reason behind these failed attempts at the 1.20 level has been Sterling supply from the corporate world. Traditionally the corporate sector will hedge their FX exposure in and around important levels like 1.20. Given we have not been at this level in over 20 months, it makes sense that Treasurers are using this opportunity to off load their pounds at good levels and mitigate their FX exposure.

So this is our first major sign post that will help indicate whether we are in a larger up-trend in GBP/EUR or whether we will fall back into the range. A weekly close above 1.20 is needed – watch this space.


Treasury First is powered by Assure Hedge (UK) Limited, a company incorporated in England and Wales (No.10723112) with its registered office at 45 Eagle Street, London WC1R 4FS, UK, is authorised and regulated by the Financial Conduct Authority of the UK (FRN:783837). Assure Hedge Limited, the parent company, is incorporated in Ireland (No. 578153) with its registered office at Dogpatch Labs, CHQ Building, North Wall Quay, Dublin 1, Ireland.

This email and any files transmitted with it are confidential and intended solely for the use of the individual or entity to whom it is addressed. If you have received this email in error, immediately notify the sender by reply email and then permanently delete this email and your reply. Unauthorised use, disclosure, storage or copying of this email is not permitted. Whilst every endeavour is taken to ensure that emails are free from viruses, no liability can be accepted for any damage arising from using this email. Treasury First does not guarantee the accuracy or reliability of information in this message, and any views expressed are not necessarily the views of the company.

Copyright © 2024 Treasury First. All Rights Reserved. Website Design Service by Bemunchie Online.