As the last days tick down to the end of 2014 I’ve had a look back at what I was expecting to see this year. The three main views covered The UK, Europe, US and Japan. Here’s part one and a brief review.
Here’s a link to what I said back in December 2013;
Littlestone’s Big 4 for ’14 – #1 Where do we go now?
I was looking for the UK recovery to catch a second wind but we needed to see that come from across the channel in Europe.
“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”
We know how Europe performed and we saw the UK recovery falter from the end of Q2 into the early part of Q4. It shows how intertwined the whole global picture is and that a domestic recovery can only get you so far.
So what happened in the currencies?
“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 seen in the second part of 2013.”
“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.”
“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”
EUR/GBP was the one pair that played to the script. It fell 7.2% from Jan 1st 2014 to the low in Sep/Oct and moved 633 from high to low.
EUR/GBP 2014
The pound gained against the yen, euro and Swiss franc in 2014, lost out against the dollar and CAD and is more or less unchanged against the AUD and NZD. Throughout the year, and particularly towards the middle the pound was well supported and the dips were soaked up pretty swiftly.
Cable has been the biggest loser this year and highlighted a point I’ve been making since I joined ForexLive. Whatever happens in an economy it will always be trumped by the US if they take off. When trading fundamentals in favour of the UK, Europe, or whoever (maybe Japan aside) you must always factor in the yanks. If they’re not performing then there’s conviction to trade against the buck. If they start rolling then you have to be ready to get out of the way. The UK led the way early in 2014 all the way up until the Carney pop at the Mansion house speech. Then we hit a mild rough patch and the US kept on trucking. 1800 odd pips lower and the UK is still in a good place but the currency has been overshadowed by the dollar. Sometimes positioning bias is most easily described by the simple question of scale.
So overall the year went just as I expected. The UK goes out at a decent level and 2015 is going to be another big year for Great Britain.
Coming next, the year of the Yellen.
Update: Here is #2, with #3 and #4 still to come.