FTSE 100 gains easing despite GBPUSD weakness

The FTSE 100 is failing to take advantage of the weakness seen in GBPUSD, with the dollar surging higher across the board. Nevertheless, with the Brexit tone softening from the EU, it is likely we will see more sterling strength to come. 

• Markets ease back as we close out the week
• Central bank easing fails to ignite stock markets
• Brexit optimism on the rise amid improving tone from EU

The FTSE 100 is erasing its morning gains as we head into the close, with the recent bout of market uncertainty continuing to dominate. In a week where central banks have been the main focus, it seems markets are somewhat confused as to whether to celebrate the recent easing or instead worry that it may not last long enough. The Fed’s role in driving sentiment has not been limited to their rate decision, with daily Repo auctions raising fears that this liquidity crunch may be more than just a short-term bottleneck.

Dollar strength has dominated the FX space over the course of the day, with the greenback gaining ground across the board. Interestingly, this dollar rally has masked much of the Brexit optimism that has been growing over the course of the day. Talk of gradual progress has also been accompanied by plenty of commentary of a determination to get a deal done by the October deadline. While the UK and EU clearly remain some way from an ultimate resolution, there is a growing feeling that the EU would be willing to drop the controversial backstop. The question is whether there is enough time to provide border solutions that can convince each EU member (not least the Irish).