Talking Points
- It’s hard to avoid the conclusion that for now at least Brexit has ceased to be an important factor for either Sterling or London stocks.
- Monetary policy and geopolitical tensions are more important drivers and could help the Pound strengthen.
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The UK media have been full of stories this week about the Brexit timetable, UK access to EU research and development, immigration and the free movement of labor, efforts to lure businesses from London to other EU capitals and the divorce bill.
Yet the British Pound and London stocks have sailed serenely through the noise, affected more by geopolitical tensions, global risk and monetary policy. In particular the Pound, while not generally seen as a haven currency, is being helped by the growing belief that tighter monetary settings in the US and the Euro-Zone are being pushed further and further into the future.
Mario Draghi, the President of the European Central Bank, is unlikely to set out a timetable for tightening policy at his press conference tomorrow after the latest meeting of the ECB’s Governing Council.
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Meanwhile, the latest comments from US Federal Reserve officials have been distinctly dovish, benefiting the Pound at the expense of the Dollar.
Chart: GBP/USD One-Hour Timeframe (August 24 – September 6, 2017)
From a technical perspective, GBPUSD has climbed back above the psychologically important 1.30 level and faces little resistance ahead of the July 18 high at 1.3120, then the August 3 high at 1.3265. EURGBP is easing back, has fallen below 0.92 and has dropped under the two-month support line joining the previous rising lows. Potentially it could decline as far as the four-month support line currently close to 0.90.
Chart: EUR/GBP Daily Timeframe (April 24 – September 6, 2017)
As for IG Client Sentiment, that is currently sending out a bullish signal for GBPUSD, with 42% of retail traders long and 58% short.
Markets
| Index / Exchange Rate | Change (Exchange Hours/GMT Session Rollover) | Market Close/Last |
|---|---|---|
| FTSE 100 | -0.55% | 7,332 |
| DAX | -0.14% | 12,106 |
| GBP/USD | +0.07% | 1.3042 |
| EUR/USD | +0.25% | 1.1944 |
| EUR/GBP | +0.19% | 0.9158 |
Upcoming UK/EU Event Risk
| Events | Date, Time (GMT) | Forecast | Previous |
|---|---|---|---|
| German Industrial Production s.a. (MoM) (Jul) | Sep7, 0600 | 0.6% | -1.1% |
| German Industrial Production n.s.a. and w.d.a. (YoY) (Jul) | Sep7, 0600 | 4.6% | 2.4% |
| Euro-Zone GDP s.a. (QoQ) (2Q F) | Sep7, 0900 | 0.6% | 0.6% |
| Euro-Zone GDP s.a. (YoY) (2Q F) | Sep7, 0900 | 2.2% | 2.2% |
| ECB Rate Decision | Sep 7, 1145 | 0.0% | 0.0% |
| ECB Marginal Lending Facility | Sep 7, 1145 | 0.25% | 0.25% |
| ECB Deposit Facility Rate | Sep 7, 1145 | -0.4% | -0.4% |
| ECB Asset Purchase Target | Sep 7, 1145 | €60b | €60b |
--- Written by Martin Essex, Analyst and Editor
To contact Martin, email him at martin.essex@ig.com
Follow Martin on Twitter @MartinSEssex
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