Market News & Analysis

Top Story

Weaker pound keeps FTSE elevated

A weaker pound helped the FTSE bounce higher even as its European peers dropped into the red before recovering again.  Monday’s trade deal optimism faded under a lack of concrete evidence and investors are subdued following China lowering its GDP forecast. As a result, European markets pared earlier gains and Wall Street opened in the red. 

We have heard that we are close to a trade deal so many times. The markets are looking for something more tangible now for the rally to take a leg higher. Particularly given the slowing growth in China, amid high levels of debt and trade dispute issues. We expect to continue seeing a level of caution in the markets as investors wait for fresh developments in US – Sino trade talks.

Pound drops no progress Brexit & UK Service sector data 
Data showed that the UK service sector managed to avoid contraction in February. The service sector pmi jumped to 51.3 in February after dropping to 50.1 in January and ahead of expectation. However, delving deeper into the numbers, there was clearly little to celebrate. The details of the report make it clear that the UK economy is grinding to a halt amid Brexit uncertainty, as consumers and businesses delay taking decisions ahead of 29th March.

The most unsettling point was the sharp decline in employment in the sector, as hiring fell by the most in 7 years. Firms putting off hiring decisions is not that surprising however, these figures are a world apart from the solid labour reports that we have been seeing. This doesn’t mean that the UK labour market is about fall apart but hiring over the next few weeks is expected to be slow. 

The pound flinched lower on the release as concerns stemming from the details of the service sector report seeped in. However, it was the gloomy Brexit headlines that were responsible for sending sterling sub $1.31 for the first time in a week. Expectations are low for an imminent break through as UK Attorney General Geoffrey Cox goes to Brussels to try to secure concessions.  This is reflected in the falling price of the pound. We expect the pound to remain under pressure across the week as investors start positioning ahead of next week’s Brexit voting bonanza.

Euro struggles ahead of ECB meeting
The dollar remains in demand. Not even better than expected eurozone retail sales data this morning could lift the euro versus the buck. Eurozone retail sales increased 1.3% in January, a marked improvement from December’s -1.4% decline. Other data points including Italian service sector pmi were also better than forecast.
However, the slew of stronger eurozone data is unlikely to change the ECB’s tone on Thursday, which is expected to err on the side of caution. 

From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.