Strong pound fails to halt FTSE surge

Heading into the close the FTSE 100 is 30 points higher, while political developments have spurred rallies in the pound and the euro.

  • Merkel seems safe in her office once more
  • UK discovers new allies on the continent
  • Fresh record highs for UK & US

Currencies are all the rage this afternoon as the euro and sterling both gain on hopes of political developments in two key stories, namely the German coalition talks and the next round of Brexit negotiations. Last-ditch moves by the various parties in Berlin appear to have borne fruit, leaving Angela Merkel still in charge, albeit with her power diminished following her less-than-stellar election showing. Meanwhile, though the Commission proclaims the indissoluble unity of the 27, it has become increasingly clear this week that there are cracks in the edifice. Various member states have made noises about seeking a sensible post-Brexit partnership with the UK, and it looks like Madrid and
 Amsterdam have broken cover to back a deal to minimise any disruption from the UK’s departure.

Even with renewed sterling strength the FTSE 100 has been able to clamber to a new high. Bullishness is rampant among investors, who appear to be tripping over themselves in a race to buy US and UK equities. Europe remains the unloved area, however, as markets begin to fret about a potential ramp-up in monetary tightening by the ECB. This is probably an exaggerated reading of yesterday’s minutes, but given the supreme dovishness of the central bank in previous years, any slight move of the monetary policy needle looks like a big deal.

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