GBP helps keep FTSE afloat after hawkish Fed

Yesterday’s hawkish tone from the Fed has dragged stocks lower, but with the pound benefitting from a weak dollar, the FTSE remains steady for now.

• FTSE flat, as GBPUSD weakness helps negate hawkish Fed tone

• Fed look towards potential third 2017 rate hike

• Draghi keeps central banks in focus

A largely unremarkable start to the day has seen the FTSE trade marginally above its opening level, in the wake of central bank decisions from the Fed and BoJ. Despite a hawkish shift from the Fed, the detrimental effect it had upon GBPUSD will have helped exporting FTSE firms this morning. Yesterday’s big surprise came with the Fed’s insistence that a third 2017 rate rise is still highly likely, bringing about a potential Q4 which could see both the BoE and Fed raise rates. The main benefactor has been the dollar, with the dollar index pushing into a new two-week high in the immediate aftermath of yesterday’s rate decision.

The central bank influence remains central to investor sentiment today, with an appearance from Mario Draghi expected to bring euro volatility in the afternoon. At a time where the US is happy to continue taking the lead in monetary tightening, the environment for ECB tightening is clearly taking shape given improving eurozone economic fortunes. The main worry will clearly be the value of the euro, which hit a 32-month high against the dollar earlier this month.

Ahead of the open we expect the Dow Jones to open 5 points lower, at 22,408.