FTSE falls back amid stronger pound

Joshua Mahony MSTA Scope Markets

The FTSE has pulled back to a two-week low amid a stronger pound fuelled by an overnight dollar devaluation

FTSE falls back amid stronger pound
Mnuchin tempers reflation expectations
RBS continues to disappoint, with yet another loss

European stocks appear to be following the overnight negativity, with comments from the US Treasury Secretary tempering any hope markets had of an immediate economic benefit of Trump's proposed policies. Stephen Mnuchin made it clear that for the most part, the new policies Trump plans to implement will make little difference to the economy, thus lowering the near-term reflationary impact, which dragged the dollar lower across the board. Overall, it has been a week of false starts for the FTSE, which has tumbled to the two-week low of 7251 today. With the dollar receding, the resurgent pound is proving to be a hindrance for any further upside in the FTSE.

If you looked at the RBS share price, you would be forgiven for thinking everything was hunky dory, with the bank's market value rising 66% over the past seven months. However, everything is far from ok, with the firm announcing an unbelievable ninth consecutive year of losses, which trebled to £7 billion. Unlike Lloyds and Barclays before it, RBS seems unable to shake the shackles of legal action, with the bank setting aside £5.9 billion for fines and legal costs over a mortgage-backed securities case brought by the US Department of Justice. While the British government now owns under 5% of Lloyd's, it looks like it could be a while until we see the government sell any of its 72% holding in RBS, with the current share price over 50% lower than the £5.00 paid by labour back in 2008 and 2009.

Ahead of the open we expect the Dow Jones to open 19 points lower, at 20,791.

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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