Caught in a (sterling) trap

October 12, 2016

What’s bad for the pound is good for the FTSE, at least up to a point. As broader measures of the pound value were touching levels last seen in the 1970s, the FTSE100 was hitting new highs, helped by the resources and mining dependency of constituents who are seeing rising prices and greater income from pricing output in dollars. We’ve seen some reversal of sterling overnight, in part on the news that PM May is to put Brexit terms to a vote in parliament. There had been some concern regarding the degree to which parliament was being by-passed in the decision surrounding the terms of the UK’s departure, so this announcement appears to be a way of placating such fears. As a result, sterling is around 1% higher as cable has recovered in the Asia sessions, after touching just below the 1.21 level yesterday evening. Bigger picture though, we’ve been here before, where the default setting for sterling is weaker, such as the early part of the year. It seems we’re here again, with sterling weakening against most other currencies, not just the US dollar.

The dollar will be taking a closer than usual look at the FOMC meeting minutes this evening when they are released. The interesting thing at present is the degree to which markets see November as a ‘not very live’ meeting, whereas December is anything but. The interest rate markets have the respective probabilities at 17% and 68% respectively. The biggest risk is that the tone of the minutes suggests an increased chance of a November move. Of course, much of the market thinking is that the Fed is unlikely to move so close to a presidential election. The Fed may want to puts itself across as being far more non-political and the minutes would be the best forum to achieve this. If so, further dollar upside would ensue.

Publication source
FxPro information  FxPro reviews

December 2, 2016
It's not the jobs numbers
It’s not bee the economy that has been driving the dollar over the past 3 weeks, of that we can be pretty sure. Rather, it’s been expectations of tax cuts and spending increases, together with incentives for dollar repatriation under the new President...
December 2, 2016
OPEC alliance stuck a global agreement
The Oil prices jumped on Wednesday after the organisation members agreed to pare production first time since 2008, to reduce global oversupply, which made the prices collapse by half since mid-2014...
December 2, 2016
Rebound continues in UK construction
The latest data on the UK construction sector was released this morning, and will likely be seen as positive overall as the recovery from the Brexit shock appears to be persisting. Despite this the FTSE 100 is under pressure this morning...

Z.com Trade Rating
XM Rating
OctaFX Rating
Vantage FX Rating
Larson&Holz IT Ltd Rating
OANDA Rating

Beeoptions Rating
Grand Option Rating
OptionsXO Rating
OptionRally Rating
OptionFair Rating
Anyoption Rating