Markets fighting back or investor profit taking

29 June, 2016

Simon Eastman

Tuesday saw the end of the recent rout against stock markets and the pound as we saw markets recover slightly and the pound make back some of its recent large losses.

Having fallen to the lowest level in over 30 years against the dollar the pound clawed back over a cent today, as policy makers stated they would take all necessary measures to protect their economies.

It’s all still doom and gloom as our credit rating was downgraded by a third agency, big multinationals said there would be a freeze on hiring new staff and possible cuts, while George Osborne said spending cuts and increased taxes would be necessary to stabilise the economy.

As the union members met to discuss the way forward, they warned the UK we must act quickly and declare we are formally leaving, as the EU Commission president Jean Claude Juncker stated, “we cannot be embroiled in lasting uncertainty “.
With politics in turmoil here, something needs to be done that’s for sure.

Labour leader Jeremy Corbyn had an 80 percent vote of no confidence from his members yesterday, while Nigel Farage poked the hornets’ nest with his incendiary speech to his fellow MEPs, where he held no punches in telling them all exactly what he thought of them now he was on the winning side. Scottish premier Nicola Sturgeon is trying anything she can to keep ties with the EU, even looking to form allegiances with Gibralter to keep ties to Europe, while its all gone very quiet from the Leave camp figureheads BoJo and Gove.

Amongst all the uncertainty we did have a few ecostats to contend with, which may have had slight bearing on market direction.

Mario Draghi the ECB president spoke in the morning voicing concerns over European growth over the coming years, downgrading his forecast. Meanwhile across the pond US GDP fell short of expectations too, meaning the pound had a boost against the greenback whilst the euro also gained over a cent from the dollar.

Many will see the pounds gains yesterday as profit taking but the more optimistic will hope it’s the start of a fight back from the pound. Only time will tell that for sure but in the meantime we have EU leaders holding a summit again while UK money supply and mortgage lending figures are released at 9.30, EU consumer confidence out at 10am, US inflation after lunch culminating in a US bank stress test at 4pm.

While everyone waits for someone to trigger Article 50 and actually get this Brexit show on the road, we continue to tread the murky waters of the FX markets. The ecostats today will most likely have no bearing so for those with a transfer to make it might be worth speaking with one of the team at your earliest convenience. The chances of an immediate recovery are slim, so whether time is on your hands or not, it may prove prudent to move sooner rather than later.