Indices Finish the Week in the Green
- Stocks regain ground after rocky week
- FX market likely to favour sterling and the greenback
- Brexit and rate risks driving FTSE hesitancy
Stocks are looking to round off the week in style, as the negativity of
yesterday is washed away in a sea of green. As the weekend approaches,
an element of hesitancy among short term traders is driving profit
taking as we head into Saturday’s G7 meeting. The problem is that while
we are seeing some respite for US equity selling, there is clear
evidence that we could be turning a corner, where further losses may be
around the corner.
Despite the strength of the US dollar this week, is clear that traders
wanting to get long sterling ahead of what is increasingly likely to be a
vote to remain in the EU. With that in mind, the deterioration we have
seen for EURGBP this week seems likely to persist, with sterling bulls
likely to pounce on any weakness in the lead up to 23 June. Meanwhile,
with the US dollar index breaking higher once more, it is increasingly
evident that the dollar has turned a corner. With the Fed increasingly
keen to raise rates in the summer, the June US jobs report is going to
be crucial as a potential enabler for another hike.
There will be a collective sigh of relief within financial markets, as
the velocity of yesterday’s selling began to paint a distressing picture
for investors who are dreaming of all-time highs rather than another
turn lower. However, for UK investors, the FTSE100 has been moving
nowhere fast in recent weeks, as the doubt and hesitancy seen in the
face of a Brexit and possible June rate hike keeps the index restrained
within a 160 point range.
