FTSE finally picks off lows thanks to strong start on Wall Street

After spending most of the session drifting lower, the FTSE is finally starting to pick up off session lows, thanks to a strong start on Wall Street. Negativity on the FTSE is broad based across the sectors thanks to heavyweight stocks going ex-div, disappointing earnings and a marginally stronger pound. 

UK GDP revised lower 

GBP/USD has managed to claw back earlier losses after UK GDP was revised downwards to 0.4% quarter on quarter, missing expectations of 0.5%. Britain grew just 1.4% year on year making it the slowest growing major economy, lagging behind Italy and Japan, as Brexit uncertainties continue to impact on data. 

Whilst this isn’t a huge downwards revision, it was sufficient to knock investor confidence over whether the BoE will be able to hike rates as soon as May. The question arises once again as to whether the UK economy is strong enough to sustain a rate rise in the Spring, with so many Brexit uncertainties still unresolved. These concerns dragged the pound lower against the stronger dollar. GBP/USD hit a low of $1.3857, before trimming these losses and turning positive on dollar weakness. 

Dovish tone to ECB minutes 

EUR/USD spent much of the day consolidating around $1.2260. Poor EU data and a continued dovish tone noted in the ECB minutes kept the euro out of favour. 

The minutes of the latest ECB meeting, in January, showed that the cautious tone remained, with most policy makers considering it premature to change the forward guidance, given that inflation remains significantly below the central bank’s 2% target level. 

However, they added that the forward guidance on quantitative easing could be revisited early this year, boosting hopes of an announcement in March. 

EUR/USD has jumped higher in afternoon trading, breaking above $1.23 but that is more to do with the sliding dollar, than any particular euro strength story. 

US opens higher 

Wall Street is seen opening higher, as concerns over higher interest rates ease slightly. As the markets continue digesting the Fed’s mixed FOMC minutes, 10 year yields slipped back from their fresh 4 year high of 2.94% to 2.91%, boosting equity indices on the open and pulling the dollar lower across the board.  

Market participants will now look to get more clarity from the Fed from a string of appearances later today by Fed officials; New York Fed President William Dudley, Atlanta President Raphael Bostic and Dallas Fed Rob Kaplan. 

Given the recent jitters in the market and the correction earlier in the month on interest rate fears, there is more riding on these speeches than usual.