Spreadex Market Update
Pound sees spectacular post-BoE performance against dollar and euro after MPC inaction
With the dollar receiving the kind of damage it normally inflicts on other currencies, the Dow Jones jumped by 55 points after the bell, outperforming its lacklustre European cousins. This despite another mixed afternoon for data, a 9 month high Philly Fed manufacturing index countered by a widening current account deficit and a slight slip in JOLTS job openings.
The FTSE, meanwhile, reversed its earlier reversal (ish), creeping up by around 0.1% thanks to a solid post-$41 per barrel showing from Brent Crude, the UK commodity stocks just about winning the battle against a shaky banking sector. The Eurozone, however, wasn’t so lucky, the DAX and CAC stuck with 1.3% and 0.9% losses, the indices punished by a euro which gained nearly 1% against the dollar as the day continued.
There appeared to be a battle over who was more dovish out of US and UK central banks this Thursday, the markets concluding that Yellen and her Fed cohorts bested their Bank of England counterparts on that iffy metric. The pound was the undoubted victor from this decision, surging by 1.6% against the dollar to touch $1.45 for the first time in over a month. Sterling’s response to the Bank of England’s inaction was interesting; nothing from the MPC suggested an imminent rate hike, yet the pound reacted with effervescent enthusiasm. Yet a combination of a) how low the currency has fallen since the start of the year, b) relief from investors that there weren’t any hints towards a rate cut, and, most importantly, c) just how poorly the dollar reacted to the Fed’s statement on Wednesday evening likely explains the pound’s post-BoE performance.
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