A set of weaker company results hit the FTSE this morning with further pressure added by airline shares. Trading is slightly more restrained than usual ahead of the key Federal Reserve meeting which will set the tone for the rest of the day’s and the week’s trading. Investors have been unforgiving towards British Airways parent International Consolidated Airlines, down 4%, selling the stock after the company decided to buy 200 new Boeing (NYSE:BA) planes.
Bets that the Fed will keep rates unchanged today are only at 60% versus a likelihood of a cut of 40%, but expectations that the central bank will tweak rates lower by July are now comfortably priced into forward rates. Still, the tone of the meeting will be crucial, particularly given that the domestic US economic data has been showing more weakness of late.
Euro in focus after Draghi comments and Trump on the attack
The European Central Bank is about to change tack on interest rates and potentially re-start quantitative easing in response to the region’s anemic economic growth, according to comments made by the bank’s president Draghi Tuesday. Economic indicators for Germany, the region’s largest economy, are not improving, partially because of the US trade wars but also because of weaker demand from Britain and domestically in other European countries, and the ECB is looking for ways to counteract that.
However, Draghi’s comments have provoked the ire of US President Trump who said that the weaker euro will undermine US exports, sparking speculation that the US President may add a currency war to his range of trade disputes. The jabs at Europeans, Chinese and other US trading partners could become progressively more bitter over the coming weeks as the US President kicks off his re-election campaign.
The euro weakened against the dollar and the pound in the aftermath of Draghi’s comments but this morning the common currency has recovered all of the lost ground, trading up 0.11% against the greenback and flat against the pound.
Sterling is marginally higher against the dollar but still relatively weak at $1.2576, suspended in the lower range while the Tory party leadership contest is in full blow. Weaker UK economic data is providing little reason for the currency to strengthen and while there is no more clarity on the political front sterling is likely to struggle to move into a higher range against the dollar.
"Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.
Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions."