FTSE climbs as Fed comments continue to weighs on dollar

The FTSE has posted considerable gains on Monday. Currently, the index is trading at 7,378, up 0.63% on the day. On the release front, British numbers were unexpectedly soft. Monthly GDP dropped 0.4% in April, its second straight decline. There was no relief from Manufacturing Production, which plunged 3.9% in April, much weaker than the forecast of -1.1%. This was the largest decline since June 2002.

Risk appetite is higher, after Federal Reserve officials hinted last week that a rate cut could be in the works later this year. For most of the year, the Fed has sounded neutral about its next rate move, but last week’s U-turn was a dramatic development. Fed chair Jerome Powell said that the Fed would “act as appropriate to sustain the expansion”, and analysts noted that he did not mention his “patient” approach to monetary policy, which has been a buzzword in Powell’s recent comments. Powell’s remarks echoed comments from James Bullard, president of the St. Louis Fed. Bullard stated that the Fed might have to lower rates shortly due to low inflation and the ongoing trade war with China. Just a month ago, the CME Group set the odds of a quarter-point cut in July at 16%, but that has now jumped to 67%.

The U.S. ended the week on a sour note, as nonfarm payrolls posted its second dismal reading in four months. In May, the economy created only 75 thousand jobs, down from 263 thousand a month earlier. Wage growth was unchanged at 0.2%, shy of the estimate of 0.3%. Despite these soft job numbers, the U.S. labor market is in strong shape, and the greenback could quickly bounce back.

Stocks Rally on Positive Trade Developments

Economic Calendar

Monday (June 10)

• 4:30 British GDP. Estimate -0.1%. Actual -0.4%
• 4:30 British Manufacturing Production. Estimate -1.1%. Actual -3.9%

Tuesday (June 11)

• 4:30 British Average Earnings Index. Estimate 2.9%
• 4:30 British Claimant Count Change. Estimate 12.3K
• 4:30 British Unemployment Rate. Estimate 3.8%

*All release times are DST

*Key events are in bold

FTSE, Monday, June 10 at 11:30 DST

Previous Close: 7,331 Open: 7,365 High: 7,381 Low: 7,356 Close: 7,378

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