The pound has moved higher on balance this morning with the currency just managing to move back above the 1.30 level. The market is now not far from where it was 24 hours ago after a better than expected retail sales number boosted sterling to its highest level since late September last year. Other than the large surge higher seen just over a month ago when a snap UK election was called, the market has seen subdued trade in a slow and steady grind higher with volatility falling off. However, just after 6.30pm there was a large and unexplained drop of almost 1% in less than a minute which bore some resemblance to the flash crash seen last October.
Stop loss triggers abrupt fall
Whilst the scale of the decline was considerably smaller, the move will likely still cause concern for pound traders and this time the excuse of it being out-of-hours and due to low volume can’t be rolled out. On the face of it the drop appears to be most likely the result of a large stop loss order which saw a long position liquidated once price fell below the swing support level of 1.2980 and the entirety of the fall has subsequently been recovered. One thing this move does show is that there are large speculative positions currently in sterling and the currency could be susceptible to even greater swings going forward. Had this drop occurred at a less liquid time, as it did last October, then we could have had another similar size decline as algos jumped on the decline and exacerbated the move in thin trading conditions.
FTSE shrugs of Trump concerns… for now
The FTSE 100 is higher by 33 points this morning and looks set for yet another record weekly close. After gapping higher following the first round of the French election, the leading UK stock benchmark has hardly looked back and the market is currently sitting on gains of a little more than 5% in the past four weeks. The latest leg higher was under threat on Wednesday as the continuing twists in the Trump-Russia saga threatened to derail the rally, but despite this the market is back near its record high made earlier this week as we head into the weekend. The recent rise is all the more impressive considering the sterling appreciation which acts as a drag on large swathes of the index’s earnings from overseas, which constitute the lion's share of profits amongst UK blue-chips.
Oil rising on OPEC hopes
The price of oil has also continued to rise this morning after the latest report that OPEC are looking at extending and deepening their production cuts. The cartel agreed upon an output quota last November for its members in an attempt to support the oil price and despite an initial rise the market had come back under pressure at the start of this month. Brent oil, an international benchmark for the price of crude, is now on track for a second weekly rise and is up by more than $6 since May began. Countries in the organisation are set to convene in Vienna next Thursday for their bi-annual meeting and the market now seems to be pricing in some further measures to support the price of crude.
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