The FTSE experienced a relatively tame final trading session of the week. Weak results from Vodafone acted as a drag on the FTSE and miners and oil majors were offering their support. Whilst Wall Street and European bourses bounded higher, with the Dax gaining over 1.5%, the FTSE was unable to show the same enthusiasm, with recent strength in the pound to blame.
GBP On Track For Weekly Gain Of 1.8%
The pound moved higher versus the dollar for a fifth straight session, putting it on track for a 1.8% gain across the weak. Versus the euro the pound hit a 20-month high overnight. Demand for sterling remains elevated as the market becomes more convinced that the UK will avoid crashing out of the EU without a deal. Whilst Chancellor Hammond and business leaders mounted pressure on Theresa May to remove the hard Brexit option from the table, the DUP also reportedly pledged support to Theresa May’s Brexit plan B, if there is a clear time limit attached to the Irish backstop. The pound seems happy to ignore the fact that Brussels are so far not agreeing to a time limit.
Investors will be looking towards Tuesday’s vote in Parliament, when the House of Commons must decide whether to support Theresa May’s Brexit Plan B. So far, there doesn’t seem to be any difference from Plan A, that we are aware of yet. Therefore, doubts exist as to whether Theresa May will be able to push it through.
Oil higher as Venezuelan Crisis Continues
Oil was on the rises concerns over Venezuela continued to hit sentiment. Whilst Venezuela’s top brass are supporting ex-President Maduro, internationally recognised Guiado is also claiming the crown. With two Presidents and threats of sanctions from the US, oil bulls are pushing the price of the black stuff higher. With sanctions already on Iran, sanctions on Venezuela would quickly tighten an already tight supply, lifting oil. Should the political crisis in Venezuela deepen we could see WTI hitting $55 sooner rather than later.
Dax shrugs off disappointing German business confidence data
The Dax rallied higher as investors shrugged off souring German business confidence. The IFO business sentiment indicator dropped faster than expected in January falling below 100 for the first time since May 2016. This is just the latest in a growing list of evidence that the German economy is facing a significant slowdown. Euro traders also dismissed the data, moving 0.6% higher versus the dollar.
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