GBP/USD ‘Cable’

Stuck between ongoing Brexit negotiations in Europe and the controversy of the Trump administration in the US, Cable continues to be an interesting gauge of market sentiment. This year’s performance has been dominated by the UK side of affairs, with the pairing recovering from January’s 22-year low of $1.1985 after PM May’s Lancaster House speech, rallying to $1.366, a post-Brexit high, as Brexit negotiations began in September.

Brokers are currently evenly poised on Cable’s prospects, according to broker data compiled by Bloomberg, with just over 50% expecting the pairing to improve from the current price, however the average target is 1.6% lower than its current level. Recent updates are on the whole positive, with ING Financial Markets providing a bullish target of $1.46 (11 Dec), while Commerzbank expects the price to fall to $1.30 by the end-2018 (11 Dec).

Events: UK Local Elections – May; US Midterm Elections – November; Fed & Bank of England meetings

GBP/EUR

The Brexit thermometer will be one of the most closely watched currencies of 2018 as the ebbs and flows of UK-EU negotiations are scrutinised to the nth degree. Reacting to the progression of divorce proceedings between the two, the pairing has been largely rangebound in 2017. Its 2017 high of €1.203 came in following the triggering of Article 50, while an 8-year low of €1.075 was traded in August after the UK government lost its majority.

Brokers are negatively biased on GBP/EUR’s prospects, with almost two thirds of brokers holding a lower target price for the end of 2018 than the current price, according to Bloomberg data. More recent updates range from a bullish target of €1.17 from Barclays (11 Dec) to Morgan Stanley’s bearish target of €1.06 (27 Nov), however the average target price remains a much more attainable €1.12, 1.1% below the current price level.

Events: Italian Elections – March; UK Local Elections – May; Brexit negotiations – ongoing; ECB Meetings

EUR/USD ‘Eurodollar’

The best performing currency pairing in 2017 of the three being analysed in this report, Eurodollar has benefitted from a sustained period of pressure on the US dollar as investors question. In the latter period of the year, however, the pairing retreated from its 32-year highs of €1.209 as the Trump administration scored its first legislative victory with it proposed tax reform bill, however it remains almost 12% higher year-to-date.

Brokers are overwhelmingly positive on EUR/USD’s prospects, with Bloomberg’s compilation of analyst data showing over 70% of brokers have a target price above the current price. Recent updates vary from the most bullish forecast of $1.30 by ING Financial Markets (7 Dec) to the most bearish target from Commerzbank’s $1.12 target. Despite the positivity, however, the average target price of $1.20 is just 1.5% above current price.

Events: Italian Elections – March; US Midterm Elections – November; Fed & ECB meetings

On the following three pages, we look at the technical indicators behind these three hugely popular currency pairings. What will you make of the analysis? Is your preferred currency pair set to move higher in 2018?