Pound Below $1.28 As Theresa May Prepares To Leave

Pound Below $1.28 As Theresa May Prepares To Leave

London Capital Group  | May 17, 2019 06:57

Wall Street closed higher for a third straight session overnight as solid economic data and robust earnings from the likes of Cisco (NASDAQ:CSCO) and Walmart (NYSE:WMT) boosted sentiment. Investors put US China trade dispute anxieties behind them and continued to jump back into equities.

After an initial wobble, stocks have proved to be relatively resilient to the threat from the White House. At these levels the market believes that a trade deal will eventually be agreed between the two powers.

US treasury yields increased as investors sold bonds, no longer needing their haven status. The rise in yields boosted the dollar to a two-week high against a basket of currencies. The dollar even regained some lost ground versus the yen.

Asian markets put in a mixed performance as they struggled to put a tough week behind them and Europe is pointing to a slightly softer start on the open.

GBP sub $1.28 as Theresa May prepares to leave

The pound has fallen through $1.28 in another session of heavy losses on Thursday. Sterling extended its losses by 0.4% versus the dollar, bringing losses to a total of 1.5% so far this week. Against the euro, the pound is headed for its longest losing streak in 15 years. The respite for the pound appears to be over.

Hard Brexit fears are back with vengeance

In two weeks, after trying to push her Brexit agreement through Parliament for a fourth time, Theresa May will layout her exit timetable. Hardly surprising, ex- foreign minister and Brexiteer Boris Johnson has already confirmed that he will be putting himself forward as a candidate to replace the PM. Given the Tories sharp losses in the polls and the Brexit party’s dominance in polling for European elections, a hard-line Brexiteer Prime Minister is becoming more likely. The overriding fear for currency traders is that this means that a hard no deal Brexit is back on the table as an option. Soft Brexit optimism is fading, pulling the pound lower.

Eurozone CPI in focus

The euro closed the previous session at fresh two-week lows, pressurised by broad dollar strength. Investors will look towards eurozone CPI data for further clues over the health of the eurozone economy. Eurozone CPI is expected to increase to 1.7% yoy in April, up from 1.4% in March. Core inflation, however, is forecast to decline to 0.7% from 1% the previous month. The mixed data is unlikely to boost the ECB into action in either direction, if anything it will show the ECB that their wait and see approach is still appropriate.

Opening calls

FTSE to open 10 points lower at 7343

DAX to open 29 points lower at 12281

CAC to open 10 point lower at 5438

Disclaimer: The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please note that 79 % of our retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing money.

Original post

London Capital Group

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