By Jamie Jemmeson ACSI, MSTA & Tyler Betts, FX Risk Manager at Infinity International
“You can’t connect the dots looking forward; you can only connect them looking backwards. So, you have to trust that the dots will somehow connect in your future.” – Steve Jobs
Steve Jobs’ philosophy of trusting that dots will connect may be very difficult to fathom in this current landscape; but who are we to question the man who created the world’s first trillion-dollar company.
Infinity International will be providing content to our clients on several relevant topics covering a variety of possible concerns during these unprecedented times. To do this, we are drawing on our own experience, client feedback as well as the input from others in our network.
Last month we covered a series on FX hedging and how this could assist your business in managing the current market volatility. This month we are looking at the topics which could impact on currency and potentially drive emotional decision-making surrounding FX hedging.
In this series, we will focus on five key looming dilemmas of 2020 and what this may mean for FX. There may only be one or two ‘trend changing’ events in a normal year, that could significantly impact the direction of exchange rates; however, this year we have seen COVID-19 increase volatility with several other events on the horizon. 2020 has been a rocky road to date, but there are five further topics that could further drive market volatility.
Each week we will cover each of these 5 dilemmas:
- UK Recession
- Brexit: UK/EU Trade Talks
- US Elections
- COVID-19 Second Wave
- End of UK Furlough
Taking Steve Job’s quote into context we will connect the dots looking backwards by providing a brief background on the subject matter – do not panic, this will not include the Chronicles of Brexit! We will also investigate the current status quo and why this is important to FX markets, in addition to the potential impact on forecasts and volatility.
Institutional FX forecasts for the next 3-month and 6-month periods highlight the level of uncertainty that remains in the markets. The views are collected by Refinitiv and provide a snapshot of over 40 financial institutions using their unique methodology to predict the potential value of the currency pair over a specified time period.
Our FX specialists have articulated the high and low data points from these financial institutions to show the divergence of views and subsequently the level of uncertainty that remains:
FX markets have seen huge swings in 2020 as a result of COVID, for example, GBPUSD has traded in a 16% range (high and low) whilst more exotic currencies such as USDZAR are in a circa 28% range. By deciphering these five looming dilemmas, it is our intention to highlight some of the remaining risks which you may consider when formulating your hedging strategy and business plans for the remainder of 2020 and into 2021.
We look forward to sharing this information with you as we all attempt to navigate the markets during these unprecedented times.
Check back next week for our first article on the topic of UK Recession and what this means for your FX strategy.
SUBSCRIBE to receive content to your inbox:
Infinity Insights Subscription
Whether you plan to exchange currency just once or many times in the future, there’s a lot to gain from getting to know the markets. We write regular currency updates that focus on the very latest factors influencing exchange rates. Simply fill in your details below and you will receive Infinity insights in your inbox.
This blog post is intended to provide you with information on the services Infinity International Limited (IIFX) offer and should not be interpreted as advice or as a solicitation to offer to buy or sell any currency or as a recommendation to trade. Foreign exchange rates provided therein are for indicative purposes only and are not intended to give an accurate reflection of current currency exchange rates or to predict future movements in currency exchange rates. IIFX is a company registered in England with registered number 06333730 and registered address at Third Floor, 24 Chiswell Street, London, United Kingdom, EC1Y 4YX. IIFX is authorised by the Financial Conduct Authority under the Payment Service Regulations 2017 (FRN: 567835) for the provision of payment services. IIFX is authorised and regulated by the Financial Conduct Authority in the conduct of designated investment business (FRN: 671108).