Yesterday I had the pleasure of spending a couple of virtual hours with three of the most informed and insightful members of the foreign exchange community. Privalgo is a company that was formed in 2018 with the vision of being different, the company would need to combine some of the best minds in the business.
The foreign exchange industry is often pigeonholed into a cutthroat community that has one agenda. Having the ability to spend this time with Matt, Ryan and Spencer, gave me a refreshing insight into how Privalgo really is making the difference between the old and the new age of foreign exchange. Clients are at the forefront of every decision; it is clear that the company insist on promoting conversation and education.
Under normal circumstances we would have been able to actually sit down and talk, on this occasion though we used the companies cloud based software to have our first chat.
After the initial introductions were made, we progressed swiftly onto our group conversation. The idea today was to discuss some global topics and to get a view from the team.
We started with some high-level points, regarding the results of the U.S election. I wanted to find out what the view was with regards to the slim margin between candidates, how unity can be achieved and what effect the result would have on the short, medium and long term for the economy and the USD. Here are some of the comments and views they had.
Matt: I think the market knew it would be a tight race. The issue is, with such a republican majority in the senate, will Biden be hamstrung and have the same issues as Obama? Biden seems to have quite bold views on Tax reforms and aims to heal the country, will the senate allow the changes? What I do believe is the democrat’s attitudes seems to be as bad as the republicans and they now seem quite smug and which is not going to help heal the divides..
Spencer: I don’t think I have ever seen the press gang up on a politician as much as Trump, I appreciate that he is outspoken, but he did highlight the fact the press did not portray natural reporting. Trumps message seems quite clear, he believes there has been cheating going on. Maybe there has been some skulduggery, I would like to think not though, not in this day and age.
How has the Trump Presidency affected the dollar and how will it change with Biden?
Ryan: The markets have performed so well and the strength of the Dollar has gone against Trumps performance over the years, I am sure he would have liked to see it lower, but the economy drove this forward…..I don’t think that people voted for or against trump, I think they voted as he is such divisive character.
Matt: Biden is so much more about global trade, more of a one world view. He definitely has softer policies and is not as aggressive as Trump, with the current risk on scenario, I see the U.S Dollar start to weaken certainly across the midterm and I also see Biden not having so much influence over the federal reserve which so we will not see the same manipulation of the US Dollar that we saw with Trump.
Spencer: I am not sure that Biden will manage to get any tax cuts through either, I am not sure how this will affect markets. They are very strong at the minute that’s due to interest rates being so low and there is nowhere else to see a return. US politics change at each sitting, voters let one party have a go, then repent and vote the other way. it’s very centrist politics. Did Obama actually manage to get any policies past?
Where did Trump go wrong in the run up to the election and is Biden that different?
Ryan: I think they are very different people. Trump after all is the self-proclaimed best marketing individual in the world. Some of his comments have left him in trouble. Comments regarding Injecting disinfectant and using light therapy might have been curtains for Trump…. “I get no credit, that’s ok, I never do”.
Spencer: For the last 72 hours we haven’t heard a lot from Trump on Twitter, which is unheard of, he seems too busy playing golf. I think it’s positive that we hear less from Trump on twitter, politicians shouldn’t have as much power on that platform. He did do a lot wrong, but he did get things done, the economy grew, unemployment reduced, he did what he said. However, Trump is a narcissist and an unbalanced individual. If he were more like Obama who Knows? Let’s see what happens in 2024, if he is allowed to come back..
Where is the Dollar heading against the Pound?
Ryan: My prediction for the value of the dollar against the pound, for the next three months is $1.25-$1.35, I think the biggest barometer will be Brexit and I see the £ strengthening longer term. Even with no deal Brexit at least we will know, so in the short term £ weakness. However, my prediction for 12 months would be around $1.40.
Spencer: I don’t see $1.25 being broken, even with a no deal Brexit. I see $1.30 in three months and north of $1.40 in 12 months’ time. GBP in my opinion is completely undervalued. With or without a deal at least we remove the uncertainty.
Matt: If we didn’t have Covid I think U.S $ would be above $1.40 and I agree with Spencer that the £ is undervalued. That being said, we have had to deal with Covid and with the talk of a vaccine and Brexit finally being settled I would see the $ at $1.45 in 12 months.
With a good insight into the U.S markets, politics and currency we moved onto topics a little closer to home. As EU negotiations seem to continually grace the front pages, I wanted to understand how these FX professionals viewed the current sticking points in the deal, their opinion of where the Euro would move against the Pound.
Ryan: I would like to start this one off as I have quite strong opinions on this. The first sticking point is dispute resolution, which I totally understand, we need to get this right on both sides. The second point is fishing territories, with this industry making up less than 1% of the economy, It does seem a little pedantic to me that four years of hard work may be lost over one issue.
Spencer: There needs to be something in return when giving away the fishing rights, some form of trade off, it’s a very historic issue.
Matt: I think one of the problems lie with the fact the negotiators are career politicians and haven’t really existed in a business world, that being said, I do think the parameters of a deal are close, and they now need to agree.
Will we accept a less favourable deal from Europe to ensure a good trade deal with the new President elect?
Spencer: I thought that this morning. Fishing rights I can let go, but why would anyone want to upset the Good Friday agreement? Having grown up in the 80’s, I wouldn’t want to go back to that. Whatever the issue is, this won’t be settled until the last minute.
Matt: I think we will end up with a Brexit deal.
Spencer: I’m not so sure. When the original vote to leave took place, the only option was a no deal, vote and leave! I voted to stay in as thought “why fix what isn’t broken, things are going well”, I think 52% of the people who voted will feel let down.
Matt: A no deal Brexit isn’t good for Europe either. With regards to the Presidency, Biden won’t want to lose allies, he will want a good deal for Ireland because of his heritage, but surely not at the cost of upsetting so many others?
If the £ weakens, is that better for the UK’s goods and services sector?
Ryan: The problem will be with import inflation, we import so much more than we export, so our goods will be cheaper abroad but everything we import will increase in price. This may shift the balance of trade in the long term but certainly not immediately.
Matt: At one point the Euro was at 1.40 it decreased to as low as 1.05, After Brexit we really need to increase our purchasing power.
Ryan: After the vote to leave the pound fell by 20% we didn’t innovate and grow, everything just cost more.
Spencer: We export three times as much from Europe as Europe does from the UK. Our spending habits are different to that of Europeans, they seem to be a lot more frugal, we spend a lot more and Europe benefits. I am bullish on the pound and as I said earlier I think it is completely undervalued, I can see 1.08 Euro in the next three months 1.16 in six months and 1.20 in 12 months.
Ryan: I think that Europe’s economy will suffer more in the next 12 months and the Euro will be the worst performer over the next three years, I see the Euro being at 1.20 in 12 months’ time, with or without a deal.
Matt: I see Euro at 1.15/1.16 in the next three months, and 1.20 in twelve months, I agree with Ryan I think the Euro will be the worst performer over the next three years.
To round up, we started looking at what’s next where does the world go with no election to focus on, no Brexit and hopefully a vaccine for Covid 19.
Spencer: I think we will revert back to looking at data from the economy, such as GDP, PMI, Earnings and most importantly interest rates, these will by far have the biggest effect on currency.
Ryan: General monetary policy will be the main focus behind the FX markets.
What will happen to interest rates?
Spencer: I think the UK will increase interest rates, when they can. The BOE need to build the ammunition and grow an arsenal to use in the future.
Matt: At the minute quantitative easing is like a drug, can we ever break away? Japan started with this in 1990 and we have seen how difficult it is to change. The FED is suggesting keeping interest rates flat for at least two years. There will be trade negotiations that will carry on through the year regardless of a deal or no deal and combined with the recovery from Covid, there will still be lots to influence the FX markets in 2021. Going forward there will always be one big thing that people focus on at a time in the market.
Ryan: Except at the moment because now we have three BIG things!.
Privalgo is lucky to have these three knowledgeable individuals on the team. The ability to process information and see the potential outcomes is an art and one that Ryan, Matt and Spencer seem to have mastered. With all the volatility in the Foreign Exchange markets it was extremely informative spending time with the team.
If you would like to understand how Privalgo’s services could help your Business or simple assist in a foreign exchange transfer, please follow the link below or contact firstname.lastname@example.org.
Please look out for the next live Podcast with Privalgo.
ABOUT THE TEAM
Matthew Clarke | Director & Founder
A classically trained Historian with a diploma in Technical Analysis, Matt has been in the FX industry for over 13 years and takes a keen interest in the Markets. Committed to growing his knowledge of the industry, Matt is a member of the Society of Technical Analysis.
Spencer Nixon | Senior Relationship Manager
Since the beginning of the century, Spencer has been delivering exceptional service in the Foreign exchange space, working at every level in the industry managing around £1.5billion in FX per annum. Spencer is a CF30 qualified financial services professional with experience that spans from private clients to running an institutional desks Spencer’s knowledge is limitless.
Ryan Hallahan | Senior Relationship Manager
Ryan is a CF30 level qualified financial services professional and has been working in the deliverable foreign exchange and business development space for almost a decade, his personable nature and his exceptional knowledge and professionalism has given him the ability to gain extensive experience and build relationships with SME’s and large corporations helping them effectively manage their foreign exchange and international payment requirements.