Weekly Currency Review: UK political instability leads to heightened interest in safe-haven currencies

Summary Currency Review

  • Headlines surrounding rising trade tensions and a possible global slowdown continue to dictate currency trading levels
  • Uncertainty regarding Brexit, UK politics reduces investor interest in the GBP
  • Safe haven status of both the CHF and the JPY appears attractive in a risk-averse global environment

Swiss Franc vs. British Pound: Continued Rise of a Safe-Haven

Over the period of May 16 to June 16, the Swiss France gained 3.05% against the British Pound. This rise came as an indirect result of the continued geopolitical tensions, particularly surrounding the US/China trade war and the threat of US tariffs on Mexico and Iran. Traditional safe haven currencies such as the CHF have benefitted recently from what has been a turmoil global state. On top of this, unstable British politics resulting from the resignation of Theresa May have compounded the flow of money away from the Pound.

Euro vs. British Pound: The Potential for a ‘No-Deal’ Brexit is Bearing Down on the GBP

The Euro rose 2.08% against the British Pound from May 16 to June 16 as a result of political inaction regarding a potential Brexit deal. In fact, a ‘no-deal’ Brexit scenario seems more real than ever after as last week, MPs rejected a motion put forth by the Labour Party to take control of the Parliament’s Brexit timetable. The prospects of the UK being worse off without the European Union seems more likely with each passing day, and will be interesting to watch moving forward.

British Pound vs. Japenese Yen: Unstable UK Politics Leads to Increased Intrigue in the JPY

The British Pound fell 2.90% versus the Japanese Yen throughout the period of May 16 to June 16. This divergence between the currencies can be attributed to the instability surrounding current UK politics. Specifically, the frontrunner, Boris Johnson, to replace former Prime Minister Theresa May has publicly stated that he is ready to leave the EU on October 31st, regardless of whether a Brexit deal is reached or not. Similarly to the Swiss Franc, the JPY has also benefited recently from the increase in global trade tensions due to its safe-haven status. We will have more concrete answers surrounding the state of the UK later this week, as they are set to release inflation figures on Wednesday followed by a critical Bank of England event coming up on Thursday.

On May 16th, 2019 I Know First algorithm issued bullish predictions for currencies for a month time horizon. The predictions include CHF/GBP (Swiss Franc to British Pound), EUR/GBP, and GBP/JPY (British Pound to Japenese Yen) with signals ranging from -0.90 (USD/RUB) to 1.50 (USD/UAH) with predictability indicator ranging from 0.13 for USD/MYR to 0.52 for USD/BRL. Over the 30-day trading period from 16th May 2019 to 16th June 2019, CHF/GBP rose 3.05%, EUR/GBP rose 2.08%, and GBP/JPY fell 2.90%, all of which is in good agreement with the I Know First forecast.

This bullish currencies forecast was sent to the current I Know First subscribers on 16th May 2019.

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 currency forecast.

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