Brexit negotiations bring weak pound and strong FTSE

Joshua Mahony MSTA Scope Markets

With strong Chinese data and Brexit driven sterling weakness, we are heading for a strong start for the FTSE.

Stocks rise as Brexit negotiations continue
Chinese data provides boost
Sterling in focus after Friday’s rally

Europe is trading in the green this morning, as a strong batch of Chinese data and a weaker pound help things along. On a day devoid of any top level European and US economic releases, much of the focus is upon the week ahead and the Asian session behind us. UK-EU Brexit discussions continue apace today, with the relationship seemingly souring amid critical comments from Boris Johnson and a drive from France towards a hard Brexit. There is now a clear need to get a transitional deal into place, with the negotiations looking ever more unlikely to conclude satisfactorily within the two-year deadline.

The Chinese data released overnight provided an overwhelmingly positive update for the world’s second largest economy, with both industrial and consumer focused indicators pointing towards a wide ranging period of strength. Amid an attempt to shift the Chinese economy towards domestic demand rather than the historically export led model, the 18-month high for retail sales provides a particular boost to those aspirations.

The FTSE has been a clear underperformer of late, with Friday’s sharp sterling rally proving a drag for the UK index. Tomorrow’s UK CPI could bring yet more hawkish pressure on the BoE, as real incomes continue to be squeezed amid rising inflation and falling wage growth. Fortunately we are seeing the FTSE gaining ground and that is in no small part to the sterling weakness brought about by today’s Brexit negotiations.

Ahead of the open we expect the Dow Jones to open 7 points higher, at 21,645.

Author

Joshua Mahony MSTA

Scope Markets

Joshua Mahony is Chief Markets Analyst at Scope Markets. Joshua has a particular focus on macro-economics and technical analysis, built up over his 11 years of experience as a market analyst across three brokers.

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