Posted on 14th December 2021 in the categories: Market Update

Market Update

GBP/USD

Currency

The Pound to Dollar exchange rate is on course for sub-1.30 readings according to new analysis. Although, another analyst at a major investment bank says any such move would prove fleeting.

“Sterling/Dollar recorded a loss of 0.82% last week. This means that it has lost ground in five of the last six weeks,” says Bill McNamara, head of The Technical Trader. McNamara also noted there is little to suggest the exchange rate is close to bottoming.

GBP/USD has this week continued to trend lower and is at 1.3256 at the time of writing. Having started December at 1.3296 but was at 1.3693 at the start of November. The 2021 peak was recorded on June 01 at 1.4250.

“Much of this has to do with dollar strength of course, as the US adjusts to the idea of a more hawkish stance from the Fed,” says McNamara.

Further declines in midweek trade come amidst growing signs that Prime Minister Boris Johnson is to tighten Covid-19 restrictions once more, with a Work from Home order introduced on 13th December 2021.

Pound Sterling Live notes that this will hamper UK economic activity significantly into year-end and all but erase the odds of a December rate hike at the Bank of England.

GBP/USD reference rates at 08.12.21

  • Spot: 1.3252
  • High street bank rates (indicative band): 1.2888-1.2981
  • Payment specialist rates (indicative band): 1.3133-1.3186

The analyst says the weekly chart shows that Sterling has retreated to levels that were last seen a year ago. However, Thomas Flury, Strategist at UBS, is looking for a more sideways orientated move to develop from here.

“The recent decline of the GBP was also driven by a wave of risk aversion that swept across global markets in the wake of reports on the new COVID-19 variant, Omicron. Sterling unsurprisingly lost out, as it is a typical risk-on currency that does well when equity markets are rallying and suffers when they fall,” says Flury.

The strategist says the move lower by GBP/USD was more moderate than had been the case during past episodes of Covid-induced anxiety in the past.

“We expect the situation to normalize soon. We think financial markets will regain confidence, which should support a sideways trajectory for GBPUSD going forward,” says Flury.

Production & Freight Update

A rise in cases in Ningbo has resulted in partial lockdowns imposed on various districts. Concerns are rising around possible supply chain disruptions, on top of the ongoing forced closures in relation to government imposed environmental restrictions.

At present, there has been no impact on the Port of Ningbo-Zhoushan, however we continue to monitor the situation closely.

Space issues are being reported ex-China, due to the large volume of Covid-19 testing kits being shipped to Europe. Rates have started to climb in response to the demand & limited capacity available.

Transatlantic airfreight capacity has increased with the reopening of the US borders in November. However, globally demand remains high due to the upcoming holiday periods, ongoing issues with sea freight, reduced capacity and pandemic-induced labour shortages. Costs remain high and lead times long.

Goudsmit UK

In response, Goudsmit UK are continuing to advise all customers at the point of quotation and order confirmation of the extended lead times so that they can be factored in when planning. We would request that you review your current requirements and advise of any issues asap. Moreover, we would urge you to review your requirements for 2022 and even in to 2023 at the earliest opportunity.

Whilst freight delays are unavoidable at this time, we are working with our customers by holding UK stock. We encourage that a minimum of 8-10mths of buffer stock is considered when re-ordering new production. Our efforts are aimed at reducing the impact of freight delays and lessen the potential requirement for costly airfreight.

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