FTSE gains as sterling is battered
The FTSE had a handsome rally, finishing the day 1.5% higher on the back of a weaker sterling and continued strength in US markets. US investors poured money into domestic stocks ahead of the next set of company results which are expected to show strong earnings. Economic data from the country continues to indicate strong growth both at present and in the quarters ahead. Having reached all time high levelsThursday the DJIA and S&P 500 both notched higher today but at a slightly slower pace and the Nasdaq lost some ground during the day.
PM’s Brexit comments trigger sterling sell-off
The latest comments from UK Prime Minister Theresa May left sterling markets flailing and the UK currency plunged 1.36% against the dollar before recovering marginally in the afternoon. EU leaders rejected May’s carefully crafted Brexit proposal causing concerns that Britain won’t be able to find a compromise in time for next year’s exit deadline. May said that given that the EU rejected Britain’s proposals without offering an alternative the two sides are now at an impasse in Brexit negotiations. European leaders were hoping to have a deal in place by the official EU summit in October, but now this soft deadline has been moved to mid-November when another summit is likely to be held. The battered pound traded at 1.3087 against the dollar in the afternoon and at 1.1135 against the euro, down 1.15%.
Federal Reserve expected to raise rates next week
In contrast, the greenback strengthened against most key currencies except the Australian dollar and the dollar index moved up from a two-month low as the markets positioned themselves for next week’s Federal Reserve rate setting meeting. The Fed is widely expected to raise rates by 25 basis points but what the market will be looking at very closely will be the bank’s updated policy outlook, particularly in the light of worsening trade tensions. The country’s economic indicators remain strong with jobless claims falling, housing prices holding firm and manufacturing continuing to go strong.
Oil prices rally
Having been hit by Presidential tweets Thursday about being too high, oil prices mostly made their way back Friday. Trump lashed out at oil cartel OPEC which is due to meet on Sunday to discuss production levels ahead of the November sanctions against Iran and argued that that they should increase output to balance out any price increases. Iran is already abstaining from the talks in protest but other Middle Eastern oil producers will also be in a slightly difficult situation because they will have to openly side with either the US or Iran after Trump said that the region would be unprotected if the US withdrew its military support. Trump’s anger was mostly directed at Saudi Arabia because the country’s officials recently
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EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
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Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
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