Daily Forex Market Report 19-Jan-2023: Sterling sent lower against US Dollar after approaching eight-month highs

Japan’s economic morass was on full display with today’s balance of trade read, which showed the biggest annual shortfall since 1979, driven by a weakened yen and a global surge in commodity prices.

Imports did slow down in December, perhaps even more than expected, but for the full year, they jumped over 39%, much faster than a 24.8% rise in 2021, driven mainly by minerals and, petroleum and gas.

The yen, seeing equities pushed lower, advanced against the dollar in this morning’s Asia trading window, with the USD/JPY fair falling 16 bps to 128.11. Advanced of half a percent were made against the pound and 0.,3% against the euro.

Wednesday’s session saw the pound retreat from an intraday high of 1.243 against the greenback, which would have seen the GBP/USD pair hit eight-month highs. The pair still closed in the green, although this morning has seen a further drawback to 1.230.

Cable sent lower after testing a key resistance point – Source: capital.com

EUR/USD performed a similar intraday retreat to 1.079, although the euro looks comparatively stronger this morning, having inched higher to 1.080.

Today’s jobless claims in the US are expected to underscore a resilient jobs market in the face of recessionary fears, but a drastic over or undercalculation of the forecast could cause the greenback to rise or fall on the FX markets according.

For the moment, the US Dollar Index (DXY) continues to range below the 102 barrier.

What does FX Risk/Exposure mean?

There are three types of foreign exchange exposure companies face:

1. Economic exposure
2. Conversion exposure
3. Transaction exposure

In short, FX/forex (foreign Exchange) exposure means the risk that an individual or company takes when executing transactions in foreign currencies.

If a business is looking to make transactions globally or in multiple currencies, it's important that they first identify their exposure to risk in order to put a calculated risk management strategy in place.

FX Risk/Exposure Management - How does it work?

Volatile currency markets can have a huge impact on your profits.

Let say that you set a 2021 price for a product, bought in USD including a 5% profit margin, based on the exchange rate when the pound was strongest.

When the pound weakened, your profit margin would soon erode, and leave you with -2.5% profit - based on the same price, from stock bought at the dollar’s peak.

This fluctuation in price could force you to either absorb the loss or increase your prices, with the knock-on effect of untenable prices in your already competitive market.

We are a payment solutions provider with over 20 years’ experience and expertise in foreign exchange payments Our services include but are not limited to:

• Hedging and FX Strategies
• Best rates for Spot trades
• vIBAN set up
• E-commerce solutions

We know that it can be time-consuming and challenging to keep up with the innumerable ongoing events that continuously affect the global market mood.

Click here for an instant quote or contact us for a free foreign exchange health check, guaranteed to save you money.