Hawkish ECB helps boost euro, dragging stocks down

Stock markets have had a somewhat uninspiring day, with a flat FTSE outperforming eurozone indices amid a hawkish set of ECB minutes.

  • FTSE flat, while the pound gains amid talk of second EU referendum
  • ECB minutes send euro higher
  • Cryptocurrencies lose ground amid potential South Korea ban

The FTSE moves towards the end of the week in somewhat unremarkable fashion, with the headline UK stock market trading largely flat amid a distinct lack of fundamental drivers. The gradual ascent in the pound will likely have something to do with the long-standing decline in the US dollar, yet with Nigel Farage calling for a second EU referendum, there will be some who see the potential for a Brexit reversal.

The EU seems adamant that a financial passport will not be granted to firms unless the UK allows free movement of labour, and there is almost certainly going to be a crossroads when the UK needs to bite the bullet and decide face the business consequences of a complete break from the EU.

Today’s ECB minutes saw a more hawkish stance than expected, with the subsequent euro boost proving a drag on eurozone stock markets. With the ECB discussing a potential shift in language in early 2018, there is a clear probability that we will see the bank prepare the markets for the end of their huge stimulus scheme. With inflation likely to play a major role in central bank decision-making, it comes as no surprise that the ECB is beginning to prepare for a time where such easy policy isn’t justified.

Cryptocurrencies remain the talk of the town, with the South Korean government expected to ban all trading in Crypto products. That drove a sharp sell-off overnight. While the old-school investor will place importance on Warren Buffet’s insistence that the cryptocurrency craze will ultimately end in tears, tech-savvy crypto investors will care more about the likely loss of the crucial South Korean market which accounts for around 20% of global Bitcoin transactions. Those following Bitcoin will notice that much of its recent gains have come in Asian hours, often denominated in the South Korean Won. Where will that trade move next?

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