Strong pound and FOMC uncertainty halts FTSE ascent

A strong retail sales number helped the pound push higher once more, to the detriment of the FTSE. Meanwhile, uncertainty reigns ahead of the FOMC meeting.

• FTSE suffers as retail sales data boosts the pound
• FOMC meeting raises interest in balance sheet normalisation
• Crude jumps despite inventories build

The FTSE has suffered yet another day of uncertainty and low confidence, with early gains turning the index into the red ahead of this evenings FOMC meeting. The release of a strong batch of retail sales figures did little to boost the index, instead raising the price of the pound. The role of domestic consumption within the UK growth story should not be underestimated, especially at a time when trade ties with the EU are under pressure.

This evening’s FOMC meeting puts the focus back on the dollar after a period which saw investors fixing their gaze on the actions of the ECB and BoE. With the idea of a third 2017 rate hike looking increasingly implausible, the markets will have to make do with a bout of balance sheet normalisation, with Yellen expected set to lay out the plans today. Quite how markets will react remains to be seen, for much of any market move will have been baked into the current market prices.

Brent crude hit a new five-month high today, despite yet another rise in US crude inventories. The recent disruption to the US crude industry has been well documented, with Hurricane Harvey in particular knocking output and refining heavily. However, while the amount of crude being stockpiled is rising, the total US output has certainly taken a knock, which when considered alongside the premise of another OPEC production freeze, can justify the recent resurgence in price.