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British Pound (GBP), FTSE Latest: London Stocks Higher but Sterling Flat

British Pound (GBP), FTSE Latest: London Stocks Higher but Sterling Flat

2020-03-04 09:00:00
Martin Essex, MSTA, Analyst
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GBP price, FTSE 100 news and analysis:

  • The FTSE 100 index of leading London-listed stocks is modestly higher in early trading while GBP/USD is little changed.
  • Sterling’s stability comes despite markets fully pricing in a quarter-point cut in UK interest rates by the Bank of England on March 26.

GBP/USD stable as markets wait for interest rate cut

A quarter-point cut in UK interest rates by the Bank of England on March 26 is now fully priced in to the markets, benefiting the FTSE 100 index of leading London-listed stocks but leaving GBP/USD little changed. According to the overnight index swaps market, there is now a 100% likelihood of a reduction in Bank Rate to 0.5% from the current 0.75% in the wake of the Federal Reserve’s emergency cut in the Federal Funds rate Tuesday to counter the economic impact of the coronavirus.

The prospect of a rate cut has led to a drop in the yield on the two-year UK Government bond to its lowest since September 2017, while the 10-year gilt yield has fallen to its lowest since September last year. This might usually be expected to weaken the Pound so its relative stability is a positive signal.

GBP/USD Price Chart, One-Hour Timeframe (February 28 – March 4, 2020)

Latest GBP/USD price chart.

Chart by IG (You can click on it for a larger image)

GBP/USD BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 7% -17% -5%
Weekly 12% 0% 6%
What does it mean for price action?
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Sterling may also be benefiting from a poll of foreign exchange strategists by the Reuters news agency predicting a 5% climb in GBP/USD over the next 12 months, although the poll was conducted before the emergency Fed rate cut. Behind this predicted advance are hopes that the UK and the EU will agree on a post-Brexit trade deal by the end of 2020, albeit perhaps a bare-bones agreement.

Meanwhile, the FTSE 100 index is benefiting from hopes of lower UK interest rates that would be expected to lower businesses’ borrowing costs.

FTSE 100 Price Chart, One-Hour Timeframe (February 28 – March 4, 2020)

Latest FTSE 100 price chart.

Chart by IG (You can click on it for a larger image)

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We look at Sterling regularly in the DailyFX Trading Global Markets Decoded podcasts that you can find here on Apple or wherever you go for your podcasts

--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below

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