Global currency markets have seen a number of big market moving events in 2018 which have created plenty of opportunities for investors. Sterling has been one of the headline stories of the year with Brexit negotiations, deals and counter-deals providing sharp swings in the pound at various stages during the year. In April of this year, the pound was trading at 1.43 against the dollar, and has now slid to its current price of around 1.26. It will be fascinating to see where GBP goes from here as we embark on 2019. The greenback itself has had a year of fluctuations, but has been generally strong in the second half of the year. Trading against the Euro, USD was priced at around 0.80 in April and has roared to an impressive level of 0.88 in December. So what can we expect from 2019 in the currency markets and which pairs offer some of the best investing opportunities?
Three Forex investment ideas and themes
EUR/USD
A number of factors are at play for the Euro in 2019 which could see the currency strengthen against the greenback. With the Brexit deadline clock ticking ever downwards, EUR will face less downward pressure from the uncertainty over the type of deal to be accepted.
In addition, there is room for optimism that eurozone inflation could act as a boost for the currency in the early part of the year. With monetary policy broadly looking stable for the year ahead there is plenty of potential upside optimism for the Euro, especially if one takes the view that the risk factor posed by Italy is now overstated.
With all of this in mind it is easy to see why some traders feel positive about the potential for EUR to perform well in 2019 as it looks to put aside the downward pressure it has felt as a result of domestic political turmoil for much of the previous year.
Risk off in Europe
The European Union has seen a great amount of upheaval in the past two years with a number of big domestic political events driving uncertainty and volatility within the markets.
Brexit has been the obvious culprit but further crisis in Greece, Italy and Spain have all weighed on sentiment and forced FX traders to look for value trades elsewhere. 2019 could see signs of a lessening of risk sentiment in Europe which could coincide with an upswing in fortunes for the EUR.
Many investors are of the view that the potential for a truly semantic European risk event has receded significantly. With this in mind pairs like EUR/GBP and EUR/CHF could offer investors value over the longer term as Europe looks to right itself following its recent period of relative weakness.
What to make of CNH?
USD/CNH is one of the most interesting pairs to watch for 2019 as the world’s two biggest economies continue to clash on a number of key topics.
The Trump administration’s trade tariffs have not been received well by Beijing and the tit-for-tat escalation has seen investors around the world concerned over the growing financial impact of a full blown trade war. With no firm agreement in place, the continuing uncertainty could impact prices.
The Yuan was trading at 6.27 earlier in the year and has rallied to its current level of around 6.86 (it was as high as 7.0 in November). Trouble brews on the horizon however as the continuing fallout from the Huawei spying scandal takes its toll on sentiment. With fresh moves likely in the standoff between Washington and Beijing in early 2019, there could be volatility in the markets creating opportunities for traders.
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