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FTSE falls to 6-week low as tariff fears spook investors

The FTSE has resumed its downward spiral on Thursday, after posting gains in Wednesday. In the North American session, the pair is at 7,204, down 0.85% on the day. There are no events in the U.K. on the calendar. On Friday, the U.K. releases monthly and quarterly GDP reports, as well as Preliminary Business Investment.

Trade tensions between the U.S. and China continue to rock global equity markets. The blue-chip FTSE index has staggered this week, falling 2.4%. The FTSE has fallen to its lowest level since late March. U.S. President Trump has threatened to slap new tariffs on China on Friday, but investors are hoping that the unpredictable Trump will cancel the tariffs, which will undoubtedly trigger counter-tariffs from China. Late Wednesday, Trump said that China “broke the deal” and this has weighed heavily on risk sentiment. The new U.S. tariffs are scheduled to kick in at midnight Friday, which leaves time for the unpredictable U.S president to hold off on the tariffs. Traders should be prepared for further volatility on the equity markets before the end of the week.

The Bank of England has sent out a message of a bias towards tightening rates, but is anybody listening? Last week BoE Governor Mark Carney that current markets expectations of future rate hikes were too modest. This hawkish stance failed to catch the attention of investors and the pound didn’t jump at the BoE’s command. Instead, GDP/USD has declined 1.25% so far this week and is testing the symbolic 1.30 level. The BoE has raised its forecast for U.K growth to 1.5%, up from the previous forecast of 1.2% and inflation is hovering close to the BoE’s target of 2.0%. With these healthy numbers, investors are not expecting rate hikes anytime soon, especially with the lingering uncertainty over Brexit.

Bonds, Yen, Gold in Demand on U.S Trade Threats [1]

European update – All eyes on Washington [2]

Economic Calendar

Friday (May 10)

*All release times are DST

*Key events are in bold

FTSE, Thursday, May 9 at 10:40 DST

Previous Close: 7,271 Open: 7,225 High: 7,261 Low: 7,205 Close: 7,204

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Kenny Fisher

Kenny Fisher [6]

Currency Analyst at Market Pulse [7]
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.