Weekly Currency Review: GBP struggles as Theresa May exits

Theresa May’s exit offers little hope for GBP

On May 24, Theresa May resigned from her position as Prime Minister of the United Kingdom. This, unfortunately, offered little hope for the pound to bounce back from a month-long struggle, with the currency dropping 2.9% against the US dollar just in May. With the fears of a botched Brexit deal on the rise, the pound has likewise been struggling against the euro. GBP/USD decreased by -1.51% in the 7-day range of last week’s forecast, as correctly predicted by I Know First’s algorithm.

While May’s resignation was followed by a slight rise in the pound, which approached $1.27 on Friday, the PM who succeeds her has little hopes of escaping similar pressures. The turbulence surrounding who will fill the vacant position will also compound to the volatility surrounding the pound, as candidates scramble to submit their application. Thus, an upside turn in the pound anytime soon seems unlikely.

South Korean Won hits pitfall in US-China trade war

Last week, the won (KRW) fell to 1,196.50 per US dollar, stumbling to a new devastating low since January 2017. The won had been suffering slowly from stagnating domestic investment, but the pressures on key players like Samsung exerted by the US-China trade war has pushed the value of the currency even lower.  USD/KRW increased by 0.25% in the 7-day range of last week’s forecast, as correctly predicted by I Know First’s algorithm.

The South Korean KOSPI index has fallen nearly 17% in the past year. A “stampede” of investors towards foreign assets is draining the local exchange. With a 51% increase in foreign stocks and bonds traded over the last three months, a stampede may be an understatement. Last quarter, Korean investors traded a new of $37.9 billion foreign stocks and bonds.  

Neither GDP nor exports seem hopeful, with GDP shrinking the fastest in a decade last quarter, and exports declining for five months straight. In the midst of this plight, Samsung is also struggling, dropping 6.7% this month over concerns about the US-China trade war. The won is now one of the steepest declining among the major currencies, excepting the Argentinian peso and Turkish lira. As “risk-averse sentiment” prevails in the global forex market, the won is definitely standing on the wrong side of investors’ confidence.

USD maintains edge over CNY

As the US-China trade war rages on, USD maintains a winning position against CNY. In the meantime, the Chinese government is doubling down on defensive measures as the prepare for the long haul. USD/CNY increased by 0.50% in the 7-day range of last week’s forecast, as correctly predicted by I Know First’s algorithm.

The CNY inched up a miniscule margin, with the USD/CNY pair falling 0.1% on May 27, after the Guo Shuqing, head of China’s banking and insurance regulator, issued a statement warning that those “shorting the yuan will inevitably suffer from a huge loss.” However, a true recovery seems far on the horizon as options traders are pricing in at a 36% chance that the yuan will stumble through the 7 per dollar line by the end of the year.

I Know First Currency Forecast, 71.15% Hit Ratio

How to interpret this diagram

Algorithmic Currency Forecast: The table on the left is the forex forecast for the forex outlook produced by I Know First’s algorithm. Each day, subscribers receive forecasts for six different time horizons. Note that the top 52 currencies in the 1-month forecast may be different than those in the 1-year forecast. In the included table, only the relevant currencies have been included. The boxes are arranged according to their respective signal and predictability values (see below for detailed definitions). A green box represents a positive forecast, suggesting a long position, while a red represents a negative forecast, suggesting a short position.
Forecast Performance: The table on the right compares the actual currency performance with I Know First’s prediction. The column titled “Forecast” shows which direction the algorithm predicted, and the column “% Change” shows the actual currency’s performance over the indicated time period. The “Accuracy” column shows a “v” if the algorithm correctly predicted the direction of the stock or an “x” if the forecast was incorrect. The “I Know First Hit Ratio” represents the algorithm’s accuracy when predicting the trend of the currency.
Signal: This indicator represents the predicted movement direction/trend; not a percentage or specific target price. The signal strength indicates how much the current price deviates from what the system considers an equilibrium or “fair” price.
Predictability: This value is obtained by calculating the correlation between the current prediction and the actual asset movement for each discrete time period. The algorithm then averages the results of all the prediction points, while giving more weight to recent performance. As the machine keeps learning, the values of P generally increase.

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Algorithmic traders utilize these daily forecasts by the I Know First market prediction system as a tool to enhance portfolio performance, verify their own analysis and act on market opportunities faster. This forecast was sent to current I Know First subscribers.

Please note-for trading decisions use the most recent forecast. Get today’s forecast and Top stock picks.

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