Daily Brexit update: Sterling drifts higher on Fed hopes, not Brexit
Stepped-up no deal preparations and a finalised post-Brexit immigration system that introduces salary thresholds and sponsorship for skilled workers have not disrupted sterling’s updrift from last week’s 20-month lows. But a look at the boost to all major currencies as the dollar retreats ahead of a likely softened Fed stance underlines that sterling’s recuperation is not all that it seems. Data out earlier at least pointed to a stabilizing inflation outlook. Still, the 100th day before Brexit sees Britain if not less able, not much better able to absorb the consequences than on the 200th.
How this affects our Brexit Top 10 markets:
GBP/USD: Cable elevation ranged as much as 230 pips from the Wednesday 12th low of $1.2475 to Tuesday’s $1.2705 high. GBP/USD was last at $1.2646. Note $1.2722, the mid-November spike low that is now key upper-range resistance. Hence GBP/USD has actually failed short of the range top and is in fact headed lower, albeit not under much pressure. $1.2554 support was established last Friday.
GBP/JPY: The cross’s first rise in four session has a top of ¥142.22 so far, 2 pips above Tuesday’s high. The rate was last at ¥141.96.
EUR/USD: The euro looks almost purely greenback-driven on Wednesday. Just now, a 9-session high, but it was close to a spike high of $1.1443 that could pose resistance, particularly as the Fed prepares to unleash new guidance. Much depends on investors’ reading of how fast U.S. tightening may go from here; less so on Brexit.
EUR/GBP: This rate posts its biggest rise against the pound for a week. More drip-drip concessions from Italy are the chief reason. Here too, resistance was capping the move at the last check, with circa .9036 a clear and clean barrier since last Wednesday.
UK 100: A risk-on day despite a looming Fed hike are boosting global markets. Oil’s recoupment of some ground lost during Tuesday’s rout also helps London’s benchmark.
Germany 30: Italy news is helping European indices, but a 3% drop of shares in heavyweight Bayer prevents Germany’s main market from benefitting much. DAX is settling 0.2% higher compared to a 1.4% jump by Italy’s FTSE MIB.
Lloyds: Lloyds is up 0.6% though proximity to last week’s two-year lows makes its first rise this week look inconsequential.
Barclays: A slower pace of Fed hikes, which is what the market expects, is a negative for U.S. market rates, and ditto for Barclays’ large North American loan businesses.
Shell: Shell bounds 1.7%, in step with increasingly volatile oil prices.
BP: BP is adding a similar gain as its main rival on Wednesday. The group reportedly eyes the sale of $3bn in U.S. assets.