It seems that election driven news have released some sort of relief and propelled GBP 1 to 3% higher against major G10 and Emerging Market currencies at the end of last week. We don't yet see any harm to GBP and uptrend is still intact. Those who've booked profits from our recent calls on this currency would have curtailed their profitability to its entirety.
Expectation from BoE: It is the outlook for UK's interest rates that will again play an upper hand when the elation of the Conservatives party's victory of an absolute majority (331 seats, 36.9%) subsides. This must be answered if any deviation of central bank policies. Monetary policy and the success of the new British government in shrinking the public deficit by cutting spending will be central to the outlook for GBP in the coming months.
Monetary Policy in Europe: Where Europe and CEMEA are still loosening monetary policy, central banks in the dollar bloc are finished cutting (Canada, Australia).
Fed's action: The Fed is gearing up for a first rate increase.
Technical & Derivatives Mirror:
The sterling's performance on the daily chart shows deviation from dollar but the smaller gains against the dollar bloc, the further gains of GBP against the euro community continues.
We would urge to evaluate our portfolio's performance from recent weeks' bullish strategies such as Call Ratio Spread, Bullish Calendar Spread and Long on Futures etc. We bet it would certainly have generated decent returns by now.
Those traders are still holding such positions can wait until another 1 to 2% upswings on spot, beneficiaries of leverage effect through F&O segment can also wait accordingly. Trim the losses and enhance gains is the prime principle and this discipline should be adopted to make yourself a successful traders. For hedgers, who are holding the above mentioned strategies currently can stay with it, others can open fresh positions audaciously sparing the best suitable cost of hedging to your forex exposures.
