It’s that time of year when everyone sets their stall out for what will happen in the next 12 months. People make sensible calls, bold calls and more often than not, downright ridiculous calls.
Picking a number out of the hat is not my game but a big part of my trading is looking at the wider picture and for signs of where that may lead prices. As we move into new situations and events having a basic idea of the possible outcomes has served me well in the past. I don’t like to drill down too deeply into any given situation when looking ahead as all that usually does is cloud the situation rather than clarify it. I like to keep it simple.
So here’s part one and my overview on how I see things progressing in the economies of the world. Are we going to see a return to the boom times this year? Not on your nelly but we are coming off a very big dip for global economies, and just like prices on a chart, economies don’t fall forever. In 2013 we’ve seen some signs of life in the US, UK, and fleetingly in Europe and Japan.
For Queen and country
Marching on to better things
The UK still has a lot to do, infact we’re still a long long way from an actual recovery but the signs are positive. It seems we’ve hit our bottom and are bouncing nicely. While we’ve reached one target, of stopping the rot, we’re going to need some external help for it to continue. We’ve pretty much had a domestically driven recovery and we need to turn that into an international recovery, and that’s where the problems come in. Our biggest trading partner is still very much underwater and unless we see Europe pick up in any meaningful way then it’s going to be tough to sell abroad. Given our ability to be flexible and adaptable we have a good chance of negating any negativity from Europe by increasing our business with the rest of the world and this is what I’ll be looking for next year to keep the UK trucking on. While worries will be voiced over a strong pound affecting the economy going forward, it’s better to have a decent economy first and worry about the FX second, so I expect any attempts to lower sterling to be limited to “talk” rather than actions.
Trading wise I’m going to be looking at the UK outperforming Europe once again. I think we will still show strength, though we may not see the rapid gains we have in the second part of 2013. If we can increase trading abroad then we could see another big leg up in the recovery. I’ll be looking to continue selling any major EUR/GBP rallies (dependant on the reasons) but I’ll be keeping a close eye on Europe as if they start improving all things euro will be in more demand than the pound. I wouldn’t expect huge gains as what will be good for them will be good for us.
In the face of good UK news demand for GBP pairs and crosses will likely remain so any news that sees big dips will likely become decent buying opportunities. Should the recovery continue we’re also likely to see talk of leaving Europe fade and a more positive slant put on a possible referendum result. This will also be a positive for the pound.
