European Open: Has GBP Gone Too Far, Too Fast?

Asian Indices:

Australia's ASX 200 index rose by 17.1 points (0.23%) and currently trades at 7,387.00
Japan's Nikkei 225 index has fallen by -211.17 points (-0.58%) and currently trades at 25,931.05
Hong Kong's Hang Seng index has fallen by -345.01 points (-1.35%) and currently trades at 25,305.07
China's A50 Index has fallen by -113.81 points (-0.73%) and currently trades at 15,452.88

UK and Europe:

UK's FTSE 100 futures are currently down -4 points (-0.05%), the cash market is currently estimated to open at 7,287.20
Euro STOXX 50 futures are currently down -1.5 points (-0.03%), the cash market is currently estimated to open at 4,399.31
Germany's DAX futures are currently up 2 points (0.01%), the cash market is currently estimated to open at 16,253.13

US Futures:

DJI futures are currently up 54.77 points (0.15%)
S&P 500 futures are currently up 30.25 points (0.19%)
Nasdaq 100 futures are currently up 3.75 points (0.08%)

The Turkish lira is a main focus with today’s central bank meeting

Turkey’s central bank announces their weekly repo rate today at 11:00 and it is arguably the biggest thing on today’s calendar, for those seeking highly volatile reactions on an exotic cross. The consensus is for another 100 bps cut, but the central bank surprised with a 200 bps cut in October so we’re on guard for another aggressive cut today, given President Erdogan vowed to fight interest rates “to the end” this week.

We also have employment data from the US at 13:30, although we are not expecting fireworks from this release given we’re in between Fed meetings and the monthly NFP report.

GBP pairs may be getting a little bit stretched

Depending on the pair, it has been a few good days for the British pound with the EU relaxing its stance on Northern Ireland and UK presenting hot inflation and decent employment data. It’s made particular headway against commodity FX pairs, but we think they may be a bit stretched to the upside, at least over the near-term.

GBP/AUD has seen a strong rally from a basing pattern, and it may well advance from here. But overnight trade has been unable to break the monthly R1 pivot and prices have retreated bac below trend resistance (of a bearish channel) then we see its potential for some mean reversion. However, we’d want to see a break below 1.8527 before becoming confident a pullback was underway.

FTSE lower on rate hike bets

Yesterday’s strong inflation report increased (already high) expectations that the BOE will hike in December, which boosted the British pound and weighed on the FTSE 100. The index broke below trend support and closed blow 7300 and above-average volume rose for a second day and closed below 7300. Our bias remains bearish below 7313 today with next support sitting around 7263 – 7270.

FTSE 350: 4183.22 (-0.49%) 17 November 2021

104 (29.63%) stocks advanced and 233 (66.38%) declined
14 stocks rose to a new 52-week high, 7 fell to new lows
58.97% of stocks closed above their 200-day average
87.46% of stocks closed above their 50-day average
18.8% of stocks closed above their 20-day average

Outperformers:

+ 9.74%-Sage Group PLC(SGE.L)
+ 4.43%-Hammerson PLC(HMSO.L)
+ 4.22%-Indivior PLC(INDV.L)

Underperformers:

·-10.50%-CMC Markets PLC(CMCX.L)
·-7.79%-Bridgepoint Group PLC(BPTB.L)
·-6.03%-London Stock Exchange Group PLC(LSEG.L)

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