It had been a bit of a mixed week for the pound before the currency received a sharp boost higher following more upbeat comments from Angela Merkel, which has left sterling set for a second consecutive weekly gain against all its major peers.
For the second time in the space of a couple of days the German Chancellor caused a flurry of buying in the pound with more positive remarks on the chances of solving the backstop impasse. On the whole, nothing has really changed, but the markets’ eager response to what amounts to little more than empty rhetoric does suggest that sentiment could be turning for sterling and should we get any tangible progress on this front in the coming weeks then there’s scope for a significant recovery in the pound.
FTSE looks to end losing streak
After 3 successive weekly losses the leading UK stock benchmark is on track to end higher this afternoon, although there is still a major event risk which could scupper this. Fed chairman Jerome Powell is set to speak at the Jackson Hole symposium at 3PM (BST) in what is not only the most anticipated event of the week for markets but arguably the whole month.
Ever since then fed chair Bernanke announced another round of Quantitative Easing at Jackson Hole in 2011 this event has attracted intense scrutiny and while Powell is unlikely to declare any change to monetary policy this afternoon the tone of his address could well shape risk sentiment for global equities going forward. Expectations are high with the markets currently fully discounting a 25 bps basis points cut next month, and around a 1 in 5 chance of a 50 bps reduction. This is a high bar to clear and should Powell reign in the current expectations then we could well get another swoon lower in stocks.