Sunday, February 16, 2014

Sterling has been good for us | A weakened US dollar

Today is a Federal holiday in the USA (Presidents Day) and, as there is little in the way of economic announcements from other sources, it can be expected that market action might be thin as the day progresses.

That said, we are very happy with our recent choices with regard to currency pairs, and the way in which they have been managed. The GBPUSD pair, in particular, has been very good for us. On Jan 31st last we entered a short trade (sold the pair). This was closed out in two parts, for risk control and profit retention purposes, with the final leg disposed of on Feb 5th . On Feb 11th we opened a long trade (bought the pair). This trade caught a considerable part of the recent run-up of sterling against the US dollar. It is still open, and very profitable, as of the time of this writing .

A weakened US dollar

We have seen a weakened dollar of late. This is on the back of two successive US employment reports that have missed expectations, a rise in unemployment claims, slower retail sales growth and a drop in industrial production. While there are suspicions that these poor outturns are due to the extreme weather that has hit many parts of the country, the market, if not the Federal Reserve (yet) has reacted accordingly and bid down the greenback.

This has been so in relation to the Yen, the Euro, the Aussie dollar and most notably, the British Pound and gold. When it becomes a little more apparent as to whether or not the less-than-stellar US economic reports are, indeed, weather related, then it will be time to reassess the situation.

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