Sterling drifts higher on Fed hopes rather than Brexit
Daily Brexit update: Sterling drifts higher on Fed hopes, not Brexit
Stepped-up no deal preparations and a finalised post-Brexit immigration system that introduces salary thresholds and sponsorship for skilled workers have not disrupted sterling’s updrift from last week’s 20-month lows. But a look at the boost to all major currencies as the dollar retreats ahead of a likely softened Fed stance underlines that sterling’s recuperation is not all that it seems. Data out earlier at least pointed to a stabilizing inflation outlook. Still, the 100th day before Brexit sees Britain if not less able, not much better able to absorb the consequences than on the 200th.
How this affects our Brexit Top 10 markets:
GBP/USD: Cable elevation ranged as much as 230 pips from the Wednesday 12th low of $1.2475 to Tuesday’s $1.2705 high. GBP/USD was last at $1.2646. Note $1.2722, the mid-November spike low that is now key upper-range resistance. Hence GBP/USD has actually failed short of the range top and is in fact headed lower, albeit not under much pressure. $1.2554 support was established last Friday.
GBP/JPY: The cross’s first rise in four session has a top of ¥142.22 so far, 2 pips above Tuesday’s high. The rate was last at ¥141.96.
EUR/USD: The euro looks almost purely greenback-driven on Wednesday. Just now, a 9-session high, but it was close to a spike high of $1.1443 that could pose resistance, particularly as the Fed prepares to unleash new guidance. Much depends on investors’ reading of how fast U.S. tightening may go from here; less so on Brexit.
EUR/GBP: This rate posts its biggest rise against the pound for a week. More drip-drip concessions from Italy are the chief reason. Here too, resistance was capping the move at the last check, with circa .9036 a clear and clean barrier since last Wednesday.
UK 100: A risk-on day despite a looming Fed hike are boosting global markets. Oil’s recoupment of some ground lost during Tuesday’s rout also helps London’s benchmark.
Germany 30: Italy news is helping European indices, but a 3% drop of shares in heavyweight Bayer prevents Germany’s main market from benefitting much. DAX is settling 0.2% higher compared to a 1.4% jump by Italy’s FTSE MIB.
Lloyds: Lloyds is up 0.6% though proximity to last week’s two-year lows makes its first rise this week look inconsequential.
Barclays: A slower pace of Fed hikes, which is what the market expects, is a negative for U.S. market rates, and ditto for Barclays’ large North American loan businesses.
Shell: Shell bounds 1.7%, in step with increasingly volatile oil prices.
BP: BP is adding a similar gain as its main rival on Wednesday. The group reportedly eyes the sale of $3bn in U.S. assets.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
For further details see our full non-independent research disclaimer and quarterly summary.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.
City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.
City Index is a trademark of StoneX Financial Ltd.
The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.
© City Index 2024