In just a few short weeks, it seems that the story for broad risk sentiment and the U.K. has changed. Since the story has changed, it was time for me to close out my short position in EUR/GBP.
Original trade idea: Hopping Back into EUR/GBP Short
On Monday, U.K. manufacturing grew less than expected (56.7 vs. 57.1), which is another sign the the strong growth we saw in 2013 may be slowing down. Last week, preliminary GDP came inline with expectations at 0.7%, which is lower than the previous read of 0.8%, and house prices rose 0.3% in January vs. 0.5% in December. Most economists consider these good numbers, but forex traders are a bit disappointed that they’re not stronger. With the strong growth cooling off, it looks like pound bulls are lightening up, which is what I decided to do as well.
Even though my stop area wasn’t breached, the story has changed enough for me to close out as I think the long sterling positions that cumulated since last summer will start to unwind a bit. Also, the current risk-off flows we’re seeing in the emerging markets and equity markets do not favor sterling in the EUR/GBP market. I closed my EUR/GBP short manually at .8290.
Total: -60 pips/ -0.37% loss
So, a small loss to start February off, but when the story changes you gotta change too, right? For now, I’ll focus on this shift on British pound sentiment against a shift we may be seeing with some of the commodity dollars and U.S. dollar. Stay tuned!