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Written by Daily FX Research Team

The pound strengthened in early European trade Thursday, despite having only one economic release.  The jump above 1.8400 followed yesterday's substantial drop to a low of 1.8309 following the release of the US trade deficit, which showed only a modest increase.  The retracement of some losses today came before the release of the BCC Second Quarter Economic Survey.  Cable was relatively unaffected by global uncertainty, despite oil reaching a new high above $75 in New York on Nigerian turmoil, and Israel launching attacks against a Beruit airfield.  On tap at 10:30 are two late announcements out of Britain.  The Leading Indicator Index for May and the Coincident Indicator Index are not expected to show major differences from their respective 0.6% and 0.2% readings in April.  As of 10:05 GMT GBP/USD traded at 1.8376, up from Wednesday's New York close of 1.8339.

The FTSE 100 was down 0.8% at 5,811.8 amid worries over violence in the Middle East after Israeli aircraft attacked Beirut airport.  The FTSE 250 fell 0.9% to 9,274.5, led lower by Emap which was hit by a disappointing trading update.  However, insurers were in focus in early trade in London on Thursday after Aviva unveiled a $2.9bn cash offer for US life insurer AmerUS.  The UK insurer fell 1.1% to 705p amid concern that the low premium offered could attract a counter-bid from a rival.  Old Mutual was down 1.8% at 160¾p and Friends Provident fell 1% to 180¼p, as the wider market retreated amid escalating violence in the Middle-East and ongoing geopolitical tensions.  Oil prices rose sharply to trade back above the $75 level, sending shares in transport stocks lower.  Cruise-ship operator Carnival was hit by the price rise falling 3.3% to £21.16 while British Airways was down by 1.5% to 357p.  The heavyweight mining sector gave up recent gains as copper prices eased off six-week highs.  Kazakhmys lost 3% to £12.00, Antofagasta fell 2.6% to 433½p and Vedanta Resources was off 2.3% at £13.77.  Adam Broadbent, Emap’s chairman, said that while trading in the first two months of the financial year was in line with expectations, “the trends that are now emerging make us more cautious about the prospects for underlying revenue, which may be marginally down in the first half”.  The media group’s shares fell 9.3% to 759p.

Ten year gilt yields were down four basis points to 4.614% as prices hit 95.060.