The FTSE is seen clinging onto its gains as the European session draws to a close, despite the US indices turning lower. The FTSE is finding support at 7550, also buoyed by a weaker pound which is finding the EU’s hard-line Brexit stance over a future trade deal hard to swallow.
EU Chief negotiator Michel Barnier has ruled out the possibility of a special deal enabling UK banks and financial services access to the single European market after Brexit. Instead access to the EU market would be determined by whether the European Commission deems UK rules to be equivalent to EU standards – rather than any rights set out in a treaty. This would mean that the EU would increase scrutiny, whilst at the time ruling out a trade deal.
The pound has responded negatively to the tough EU stance, although has by no means fallen off a cliff. This is for two reasons, firstly, the EU is most likely pre-negotiating positioning, given that the trade talks haven’t started and aren’t due to do so for several months still. Secondly, the pound is relieved that it appears that Prime Minister Theresa May’s Cabinet appears to be on the same page as far a key themes of Brexit issues are concerned. Also of note, the UK banking sector was still trading in positive territory heading into the close, suggesting certain laissez faire attitude for the moment, which will not doubt change as we move closer to negotiations beginning in.
Sterling stuck in range as trading slows for Christmas
GBP/USD has found itself trading within a tight range of 1.3345 – 1.3365 for most of the day. With most of the high impacting important news out before Christmas we could see range bound trading continue, with a slight bearish downtrend. Beyond support at 1.3345, the pound could slip to 1.33.
Doubts emerging of political impact of bill, as votes are set to take place
After the record breaking sessions in the US, it is not so surprising to see the US indices move lower today, as investors book their profits from the terrific run, before the Christmas break.
For the second day the dollar is refusing to show signs of excitement over the tax reform bill, falling 0.1% versus a basket of currencies, even as the House vote is imminent and as the Senate vote is in the bag. Dollar traders are looking beyond the benefits for corporate America and Wall Street and are starting to show concern for the political risks that come with pushing a bill through, whose benefits are skewed to the most well-off sectors of society.
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.