The FTSE 100 is trading in positive territory this morning as the strong recent rally continues. The pound is little changed against many of its major peers, with the currency remaining under pressure and trading close to its post-brexit low against the US dollar. Since the Bank of England announced their new measures of monetary easing on Thursday 4th August the GBPUSD has closed lower on 6 out of the 7 subsequent full sessions.
Commodity shares outperform
Stocks in commodity companies are moving higher at the start of the week with Anglo American (LON:AAL), Antofagasta (LON:ANTO) and Rio Tinto (LON:RIO) all enjoying a bright start in London. The rise in oil benchmarks has also attracted buyers into Royal Dutch Shell (LON:RDSa) and BP (LON:BP) as Brent Oil has moved up above $47.50 as the market continues to build on last week’s strong gains. Retailers are seeing some downside since the market open with Next, Sainsbury and Marks & Spencer all experiencing some sizeable selling ahead of Thursday’s retail sales data release for July.
Fresh data to drive new flows?
The Bank of England monetary policy announcement and US NFP report in successive days at the start of the month have remained as the driving force for the markets in subsequent sessions but this week there’s several data points which could provide a fresh impetus. Before the aforementioned retail sales data for the UK is published on Thursday, there is the latest inflation release tomorrow and employment figures out on Wednesday. The most recent CFTC data shows the money managers hold a fairly extreme level of shorts in sterling and some better than expected economic releases in the coming days could lead to some short-covering and a snapback rally following recent declines.
Cable focus to shift stateside?
The GBPUSD has been largely driven from the pound perspective of late but that could also change this week with Tuesday’s release of US CPI and the following evening seeing the minutes from the last Fed meeting published. Whilst the UK’s releases could be significant, they are unlikely to have a material impact on monetary policy in the near-term, whereas their US counterparts might. On Friday a surprise drop in US inflation saw the buck move lower as traders reduced expectations on a Fed rate hike anytime soon. If tomorrow’s release also comes in below forecast then the chances of an increase in rates in September would be remote, and we could get some dollar weakness. Along these lines the Fed minutes from their most recent meeting may shed more light on the rate-setting bodies propensity to hike in September, and if the overall view is more dovish than previously thought then we could get further weakness in the US dollar.