After jumping higher in early trade, the FTSE has manged to hold onto its gains. Boosted by a trade truce between US and Mexico, the prospect of greater central bank globally and a weakening pound the UK index is making an attempt to break through resistance at 7375.
Pound struggles as UK economy slows
Dismal monthly GDP data, in addition to weak manufacturing and industrial production numbers laid bare the impact of Brexit uncertainty and trade tensions on the British economy. Whilst the monthly GDP tracker is volatile and we say that one bad reading doesn’t constitute a trend, two consecutive readings of contraction are hard to ignore. The data suggests that the UK economy is facing a marked slow down in the second quarter. The pound dropped to a weekly low of $1.2654. Whilst it has picked up marginally in the afternoon session, we expect pressure to remain on the pound as the Conservative leadership battle heats up. With nominations formally opening today, investors will get a first look at how popular pro- Brexit candidates are. This could in fact spook investors further.
FTSE levels to watch:
The FTSE is trending higher trading above it 50, 100 and 200 sma on 4-hour chart; a bullish chart. The index is currently testing resistance at 7375. A breakthrough at this level could see the index extend gains to 7420 and up to 7460. On the downside support can be seen at 7260 before 7190.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.