FTSE muted as Brexit warnings weigh on Sterling

FTSE muted as Brexit warnings weigh on Sterling

With suggestions of a potential resistance being mounted against Boris Johnson’s likely no-deal Brexit trajectory, Sterling gained slightly yesterday morning. Unfortunately, this gain perhaps dampened FTSE prospects of joining in yesterday’s rally (until later in the afternoon), at least to the same extent as other European indices.

Speaking on market opening movements and his predictions for the morning, Spreadex financial analyst Connor Campbell stated,

“Europe was pretty tame after the bell on Friday, with the UK markets bracing themselves for what could be a rather depressing data dump.”

“Though still above 7250, the FTSE slipped 0.2% as trading got underway, roughly in line with the performances of the DAX and CAC. It could have been worse; the UK index’s mining and banking stocks are all down around 1%, losses that were somewhat compensated for by a 7% rise from WPP, which insisted its turnaround is on track despite a 43.5% slide in full year pre-tax profit.”

“Sterling was similarly muted. Against the dollar it was flat at $1.2135, while against the euro it dipped under €1.084 following a 0.1% decline. The pound is likely saving its energy for the data workout it is set to undergo this morning. The UK’s Q2 GDP is expecting to have flat-lined, a sharp drop-off from Q1’s 0.5% increase; the monthly figure, meanwhile, is forecast to drop from 0.3% to 0.1%.”

“On top of this, the currency is facing a big about face from the manufacturing sector, with production for June estimated at -0.1% against May’s 1.4% increase. Though the pound has been politically-focused of late, it’s hard to see this selection of pre-Brexit warning signs allowing sterling a happy end to the week.”

Since then, sterling has dropped against the euro and dollar, following news that the British economy shrank during the second quarter. This was driven by car makers pulling forward their scheduled shutdown periods, which drove manufacturing growth to its biggest rolling three-month fall since the financial crash. Further losses should not be ruled out, with the FTSE set for a tasking morning with two GDP readings.

Other market and macro financial news has come from; the London Stock Exchange Group (LON: LSE), the US-China currency manipulation debacle, and analysts’ outlook for markets and currencies.