Trade optimism as US -Sino trade talks continue and hopes that a second US government shutdown will be avoided, have boosted sentiment across the globe on Tuesday. Yet despite an initial move higher and a positive start on Wall Street, the FTSE was unable to cling onto its morning gains. A rebounding pound, after Theresa May pleaded for more time for her Brexit negotiations, along with TUI dragged the UK index lower.
Pound jumps as PM May pleads for more time
The pound bounced off a three-week low after Theresa May said she needed more time to renegotiate with Brussels over her Irish backstop arrangement. Whilst Theresa May still claimed that the government was aiming at leaving the EU on 29th March, she dodged questions on extending Article 50. The pound picked itself up from $1.2833 and is heading back towards $1.29.
At these levels it is still safe to say that the markets are not pricing in a no deal Brexit. Pound traders are seeing an extension of Article 50 as the most likely scenario. This would see a continuation of uncertainty keeping pressure on the pound, but not pulling it as low as a no deal scenario would. Should traders start to believe that Theresa May’s deal is going to make it through Parliament as she runs the clock down, then we could expect the pound jump sharply through $1.30 back towards $1.34. However, with another meaningful vote now expected on 27th February, there is still some time to go.
A stronger pound is less beneficial for the multinational companies on the FTSE. These make up around 70% of the index. As a result, the FTSE could barely keep its head above water, whilst the Dax soared 1% and the Dow surged 0.8% as it opened.
Dollar runs out of steam
The dollar experienced a bout of profit taking after 8 straight days of gains. With no notable data to support the next leg higher, dollar traders booked their profits whilst waiting for the next catalyst. Fed Chair Powell is due to speak this evening at 17:45 GMT. If he sticks to his recent song sheet, then he is unlikely to do any favours for the dollar. US inflation data tomorrow could also keep dollar bears out of the game. CPI is expected to fall to 1.5% from 1.9% in January. Falling inflation will keep the Fed firmly in a wait and see mood.
CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed
Recommended Content
Editors’ Picks
EUR/USD steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.