The pound is starting the week on the front foot, rising versus the dollar and the euro
The pound is starting the week on the front foot, rising versus the dollar and the euro. These early gains will be welcomed by decision makers in Westminster, especially after last week’s debacle. The pound dropped and bond yields spiked after a series of shambolic decisions by the UK government failed to calm the markets, which had been spooked by the unfunded tax cuts proposed by the now infamous Kwarteng-Truss mini-budget. With the arrival of new chancellor Jeremy Hunt, it is expected that almost all the measures included in the mini-budget will be scrapped, as the British administration scrambles to regain the confidence of the markets. Early signs are positive, with the pound rising and bond yields dropping, as investors welcome the return to a more orthodox economic policy.
Ricardo Evangelista – Senior Analyst, ActivTrades
European markets climbed on Monday, alongside US futures, trimming some of last week’s losses as market sentiment strengthens.
Utilities and energy shares are leading benchmarks higher this morning while the FTSE-100 index brings one of the best performances of the old continent, as investors cheered the reversal of previously announced unfunded tax cuts in the UK. Market expectations are improving in London as the news gave a fresh boost to investor appetite for UK assets such as the pound, bonds and equities following the ending of the BoE’s asset purchase programme last Friday. Market sentiment is also improving globally as monetary tightening, expectations of a more durable hawkish stance and much higher rates are now getting priced-in. That said, investors will cautiously monitor corporate results this week, in order to get a more accurate view on how the current tighter liquidity environment is impacting profits. Today all eyes will be on Bank of America Corp, Charles Schwab Corp, Bank of New York Mellon Corp and Rio Tinto Ltd while traders will also wait for the US NY Empire State manufacturing index due later in the afternoon.
The FTSE-100 index still trades above its 2022 low but below its mid-term bearish trendline, slightly below 6,900pts.
Pierre Veyret– Technical analyst, ActivTrades
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