FTSE continues to flounder amid rising pound

The FTSE is drifting lower as the pound strengthens, with the euro also gaining ground despite impending election risk.

• Pound rally drags FTSE lower, as markets presume Tory majority

• Euro gains despite threat of French election

• Crude tanks as US outlook undermines OPEC cuts

The FTSE is weakening once more this morning, as the pound continues its ascent in the wake of Theresa May’s decision to call a snap election in just seven weeks. To many the appreciation of the pound seems counter-intuitive, yet the prospect of a strengthened Tory majority means there is hope that this election could be good for the UK in Brexit negotiations. While Jeremy Corbyn is pushing his long-standing socialist policies, the fact is that this is essentially a vote on who we want to lead our country into Brexit negotiations. Corbyn seems ill-equipped to deal with his own party members, let alone European heads of state.

World stock markets may be rangebound ahead of the first round of the French presidential election on Sunday, but the euro has hit a three-week high against the US dollar which is down slightly against a basket of currencies. Currently centrist Emmanuel Macron is ahead in the polls, but those polls have closed up significantly in recent days and the final two could come from any of Macron, Francois Fillon, and the anti-euro candidates Marine Le Pen and Jean-Luc Melenchon. The best case scenario for the euro would be a Macron-Fillon run-off, while the worst case would see Le Pen and Melenchon fighting it out in the second round. The most likely scenario still appears to be Macron and Le Pen
 in the second round, but there are plenty of undecided French voters who could make a difference and the vote looks as uncertain as it ever has.

Crude prices took a significant hit yesterday, despite ongoing rumours of a likely extension to the current OPEC output cuts. It seems that there is new desire to attempt to cut world stockpiles by reducing output once more. However, with the US continuing to raise output and Trump pursuing a pro-oil energy policy, and the drawdown in API/EIA inventories slowing, it is clear that any OPEC-fuelled gains will continue to be undermined by the US.

Ahead of the open we expect the Dow Jones to open 34 points higher, at 20,438.