Pound Plummets Lifting FTSE Above 7500

After a slow climb out of the blocks this morning as investors digested RBS results, the FTSE surged, boosted by a weaker pound on the back of a disappointing GDP reading. News that the UK economy practically ground to a halt quarter on quarter at the start of this year was the straw that broke the pounds back, sending the sterling over 1% points lower versus the dollar.

After a slow climb out of the blocks this morning as investors digested RBS results, the FTSE surged, boosted by a weaker pound on the back of a disappointing GDP reading. 

News that the UK economy practically ground to a halt quarter on quarter at the start of this year was the straw that broke the pounds back, sending the sterling over 1% points lower versus the dollar.

High impacting UK economic releases have been dismal across the last 2 weeks as the economy grinds slower. 

Just 2 weeks ago investors were pricing in an almost 90% probability of the Bank of England hiking interest rates when they meet in May, that now seems like a distant memory with economic growth hitting a lacklustre 0.1% quarter on quarter, below the 0.3% forecast. Whilst on an annual basis growth was just 1.2%, lower than the 1.4% forecast.

Investors recognised the significantly reduced possibility of a Spring hike, quickly selling out of the pound, pulling it sub $1.38 to its lowest level in 2 months.

Multinationals thrive as the pounds sinks

On the FTSE, multinational consumer staple firms such as Diageo, Unilever, Rickitt Benckiser and British American Tobacco dominated the upper reaches of the FTSE as the weaker pound boosts their foreign earnings. 

The FTSE looks set to gain for its fifth straight week, its longest winning streak since January.

RBS lower despite stronger than forecast pre-tax profits

RBS was under the spotlight, dropping 1.7% after reporting results which were not as bad as all that. 

RBS reported a much stronger than expected pre-tax profit of £792 million in the first quarter, as costs stemming from restructuring and legal fines from misconduct fell. 

However, despite the surprise on the upside from the results, investors ditched the stock as they await the outcome of yet another misconduct being investigated by the US Department of Justice.

Wall Street Lower & Dollar up 1.5% across the week

Despite expectations of a stronger start on Wall Street, the markets dipped in early trade. 

Not even a 4.2% rally from Amazon on top earnings or a better than forecast US GDP reading was sufficient to prop up the market. The US economy grew 2.3% in March, above the 2% expected. 

Personal consumption grew 1.1%, down from 4% in the fourth quarter. Meanwhile the Fed’s favourite measure of inflation, core PCE remained constant at the target beating level of 2.5% for a second straight month. 

Yet following the data, the dollar increased just 0.1% looking rather tired after weekly gains hit 1.5%

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