Spreadex Market Update
Pound surges ahead of expected ECB inaction
Rising 0.8% against the dollar and 0.6% against the euro the pound was the biggest riser this morning. Its early gains have seen sterling climb to $1.325 and €1.20 respectively, investors seemingly satisfied with the promise of inaction when the ECB meet for the first time since the Brexit result later this afternoon. Of course market sentiment won’t just be linked to the non-announcement of any fresh stimulus; no, Mario Draghi’s post-meeting statement and subsequent Q&A will be just as important, his comments vital for investors as they try and ascertain when and how the ECB might act to mitigate the effects of Britain leaving the EU.
While this ‘wait and see’-style may suit sterling it isn’t doing much for the FTSE, the UK index falling by around half a percent, though that still leaves it hovering near the 6700 mark yet again. Before the ECB meeting the UK produces some data of its own, namely the latest retail sales and public sector net borrowing readings; the former is forecast to slip to -0.4% from 0.9% month-on-month (something that could temper the pound’s gains), while the latter is set to widen to £9.3 billion.
As for the DAX and CAC, though they will be clamouring for a bit more stimulus the euro’s lacklustre morning against the pound has so far provided some salve for their disappointment, the German and French indices rising 0.4% and 0.1% respectively. While the region will be interested in Draghi’s post-Brexit assessment, it will also be keen to hear his thoughts on the Italian banking situation, especially with news that the country’s PM Mario Renzi is looking to use a privately backed fund to rescue the failing Monte Paschi.
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