Neither the Dow Jones nor the dollar was happy with last night’s Federal Reserve rate hike, leading to a tough open for the European indices.
The Dow dropped more than 100 points as Jerome Powell confirmed the Fed’s 2nd hike this year, with the central bank also hinting that there could be 2 more to come in 2018. Yet this pretty hawkish statement wasn’t enough to prevent the dollar from slipping into the red, the currency falling 0.3% against the pound, 0.4% against the euro and 0.5% against the yen. That’s arguably more to do with the strength of the greenback’s performance this year and the long-signalled nature of Wednesday’s hike, however, than any real sense of disappointment.
All this had a very negative effect on Europe, with the open further complicated by Thursday’s ECB meeting and the potential that Mario Draghi and co. could announce when they intend to end their long-running QE programme.
The FTSE fell 60 points to near its worst price since the end of May, while the DAX and CAC were down 0.7% and 0.9% respectively. Whether these gains deepen will be dependent on how informative the ECB is this afternoon.
But that’s not all! There’s also the latest UK retail sales reading, forecast to fall from 1.6% to 0.5% month-on-month. If accurate that would be a 4th consecutive day of dovish data for the pound to deal with, and something that could quite easily erase the currency’s $1.34-teasing gains against the dollar in the blink of an eye.
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