Pound hits weekly low; FTSE little changed

Sterling has fallen to its lowest level of the week this morning as the ongoing failure to progress Brexit talks on to the next stage continues to weigh on the currency. The pound has fallen back below the 1.34 handle against the US dollar and is not far from handing back all of last week’s gains. The pound depreciation and recent weakness in global equities are applying opposing forces on the FTSE 100 at present, with the benchmark little changed on the day but remaining above 7300.

DUP standing firm on Brexit demands

The start of the week had seen some positive flows into the pound with Theresa May’s trip to Brussels expected to put an end to the initial Brexit discussions and allow talks to move on to the more pressing matter - from a markets perspective at least - of future trade relationships. However, the DUP put paid to these plans and for now the talks have reached a stalemate. Positive comments from both sides of the UK-EU negotiating table fail to mask the fact that until the contentious issue of the Irish border is resolved there will be no discussions on trade and this is will continue to provide downward pressure on the pound until it is resolved.  

US stocks reverse tax bill gains

The passage through the Senate over the weekend of the GOP tax bill saw strong gains higher in US stocks on Monday’s open, but these have since faded and been handed back. There is a case to be made that this was a classic example of a buy-the-rumour-sell-the-fact trade but it could actually be down to the fact that the bill isn’t that positive for US firms profts. The bill itself totalled almost 500 pages and its construction appeared far from scrupulous with handwritten notes added and pages seemingly crossed out with a large X in pen. Upon closer inspection the dropping of a repeal on the corporate alternative minimum tax (AMT), which basically sets a lower bound for corporate tax at 20%, has in effect maintained the floor for tax cuts at 20%. S&P500 futures are currently on track for a third consecutive lower close and this is souring global stock indices and weighing on the FTSE, negating the benefits of the recent fall in the pound.

Bitcoin closes in on $13000

Another move higher in the seemingly unstoppable charge in Bitcoin has attracted attention this morning, with the price smashing through the $12000 barrier and just a few hours later closing in on $13000. Record peaks are tumbling on a near daily basis and the market cap has now reached approximately $220B. There is no positive fundamentals to support the day’s 9% gain and it appears the bubble is growing at an increasing pace. Even the most ardent Bitcoin bulls would struggle to justify the rationale behind the latest gains which has seen price nearly double in the past month despite the failure to implement a long overdue software upgrade. To put this in perspective this has seen the market value of Bitcoin rise by around $80B in just weeks after it failed to solve the speed and cost issues that have blighted its use as an effective currency.