FTSE falls back to flat on the year

David Cheetham XTB UK

After a bright start to 2018 the FTSE 100 has fallen back in recent trade with the benchmark now trading back close to the level it at which it began the year. A strong rise in the GBP/USD rate in the past week is one of the main reasons for the pullback, with the FX rate moving above the 1.39 handle on Wednesday to trade at an 18-month high.

UK stocks on course for 4th day of declines

It's been a week of softness for the leading UK benchmark with the FTSE on track to post a 4th consecutive daily decline. Last Friday the index closed at its highest ever level but a fairly sharp rise in the GBP/USD rate, after the stock market has closed, on talk of support from Spain and the Netherlands for a softer Brexit, was an early warning sign for investors. As we head into the tail-end of the week the last few days of trade have engulfed the previous weeks gains and should the market close tomorrow night at current levels or lower levels, then a technical reversal signal will be printed.

US inventory data in focus for Oil traders

One of the main events to look out for this afternoon is the weekly DOE crude oil inventories from the US, which is expected to show a 9th successive decline. The continued drops seen in US stockpiles indicate that the strategy from both OPEC and non-OPEC members of curbing production is working well in eliminating the supply glut, which caused the oil price to crash in 2014 and 2015. However, there is a growing feeling that these measures could actually be working too well and with Brent crude moving above $70 a barrel this week there is an increased possibility that US shale producers - who have higher extraction costs and therefore reduce or postpone operations when the price is too far below their break even point - will ramp up production once more. Last night's API release, a private alternative seen by many as a precursor to today's public data, recorded a decline of 5.1M barrels for the past week. Given the strong rally of almost 60% seen in price over the past 7 months, it may take an even larger drop in this afternoon's release to boost price further. Extreme levels of long positioning from speculators remain a cause for concern amongst oil bulls, and any negative developments in the coming weeks could see a swift correction lower in price.

Author

David Cheetham

XTB UK

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