FTSE at the mercy of resurgent sterling

Heading into the close, the FTSE 100 is 70 points lower, while sterling hits a fresh 52-week high against the dollar.

  • FTSE tumbles to key low
  • Carney talks up the pound
  • Miners take a beating again

A stronger pound and an ongoing rout in copper and mining stocks took their toll on the FTSE 100, with the index dropping back to the 7300 level once more. Sterling has surged to fresh highs for the year versus the dollar, while the currency continues to whittle away at the gains made by the euro in recent weeks. According to the Bank of England, markets and UK consumers should now be on watch for a rate rise in coming months, but those with long memories will remember that we have been here before, in 2014 and 2016. If it was not appropriate to raise rates then, without the uncertainty of Brexit hanging over the UK economy and an ongoing wage squeeze on consumers, it does not seem
 particularly likely that we will see one now. But for now the bank has succeeded in talking up the currency, which will at least alleviate some inflation pressures.

For a second day, declining copper prices have hurt mining stocks hard in London, with the sector putting a sizeable dent in the index. The drop comes as hedge funds pull back their exposure to copper, with the rally being unwound in spectacular style. It looks as if Chinese investment will be cut back, reducing demand for this key metal as well. The only hope now is that the dollar will take a further turn lower, which would at least help to alleviate the decline.

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