FTSE lagging as sterling drives higher

FTSE underperformer again as sterling re-finds some form

European equity markets are poised for a slightly higher open on Wednesday, with the FTSE looking like the underperformer once again as sterling marches higher.

The pound broke back above 1.30 against the dollar on Wednesday, registering more than 1% gains on the day in the process. There have been a variety of reasons touted for the gains on Tuesday, including Brexit optimism on reports that the Malthouse Compromise has been ditched and stronger jobs data.

GBPUSD Daily Chart

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Whatever the reason, it’s certainly looking more bullish than it did a few days ago and I’m sure a weaker greenback isn’t doing that any harm. Whether it can break beyond 1.32-1.33 region without something more significant on a deal with Brussels I’m not convinced.

A golden day for sterling

Gold buoyed by US yuan demands

Gold took another big leap higher on Tuesday, buoyed by a softer dollar as speculation mounted that the US is demanding that China stops devaluing its currency to support exports. The issue of currency devaluation has long been a complaint of the Trump administration and the decline in the yuan as tariffs were imposed will not have eased those frustrations, even if some would argue it’s a natural response to them.

Gold Daily Chart

The last week or so has been very good for gold, gaining more than 3% and now testing $1,340 as it powers on. It’s not just the dollar moves which have been driving it on, in fact the dollar has been a hindrance for most of this month. The dovish shift by central banks across the globe is typically bullish for the yellow metal and we’re seeing that play out nicely.

Yen weakens on delayed reaction to Kuroda

WTI dragging its feet as traders eye inventory numbers

The weaker dollar is also giving oil a lift although in this case, we’ve run into strong technical resistance around $56 and WTI is struggling to break through. Brent is one step ahead – having broken through $65 late last week but is now being held back as its US cousin drags its feet.

With API and EIA oil inventories due in the next couple of days, and US oil rig data on Friday, there’s plenty of opportunities for something to provide the catalyst for the breakout, which could see the bulls gain significant momentum.

Economic Calendar

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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