There’s been some weakness seen in sterling this morning with the pound making a fresh low on the week against the US dollar below the 1.31 handle. The FTSE 100 has now recovered the majority of Wednesday’s slide and is back above the 7500 level.
Sterling strength short-lived
A sharp move higher on Wednesday following a better than expected UK GDP reading has proved to be short-lived with the currency handing back all the gains against the US dollar in the past 48 hours. Given the lagging nature of the data, as well as the fact that the economic growth shown was still far from impressive, the reading was unlikely to provide a lasting force on the market and this has proven to be the case. Given that markets are currently pricing a greater than 80% chance of a rate hike from the BoE next week, there is a growing amount of room for disappointment and the risks for the currency remain skewed to the downside.
FTSE looks to claw back weekly declines
The reversal seen in the pound in the past couple of sessions has coincided with a recovery in the FTSE 100 with the index now trading only slightly lower on the week after falling close to its lowest level of the month on Wednesday. Price has recaptured the 7500 level this morning and with European stocks soaring after the ECB announced a 9 month extension to its asset purchase programme yesterday, the macroeconomic backdrop for equities remains extremely supportive. Stock markets in Frankfurt and Paris have recorded fresh all-time highs this morning and with the latest weakness seen in the pound there is a fair chance that we see the FTSE 100 break higher in the not too distant future.