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.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.