The way trading has been this week it honestly seems like the market had collective amnesia between the end of June and the start of October, only just now remembering what a Brexit actually means.
If the pound was a prize fighter the referee would have already rung the bell, the currency bloodied and bruised beyond belief. It seems that sterling is recreating last night’s flash crash in slow motion, its losses against the dollar widening to 2.6%, taking it under 1.23 in the process; against the euro things were just as bad, the pound plunging under 1.13 following a 2.4% fall.
Beyond the post-flash crash fear that seems to have taken hold of investors, the intensification of sterling’s decline can largely be pinned on 2 factors this morning. Firstly, both the manufacturing and industrial production readings came in below expectations at 0.2% and -0.4% respectively, somewhat contradicting the positive PMIs from earlier in the week. Secondly, and perhaps most damningly, HSBC issued a pretty bleak statement claiming that, as the ‘defacto official opposition to the government’s [Brexit] policies’, the pound could well find itself circling $1.10 by the end of the year.
As has been the trend this week the pound’s plight has proven to be catnip for the FTSE, with the UK index climbing 58 points to tickle 7070. The Eurozone indices, on the other hand, are less than enthused about the euro’s recent strength, with the DAX and CAC both falling 0.8% apiece.
Looking ahead to the US open and what would normally be the week’s highlight, the latest non-farm jobs report, faces a challenge to make itself heard above the Brexit buzz. The fact that analysts are expecting a rather milquetoast survey, with the headline non-farm figure forecast at 171k against 151k last month, will mean it is even more difficult for the jobs report to assert its usual hold on the market. At least the Dow Jones is willing to pay attention, the futures currently trading at a mild 30 point loss ahead of this afternoon’s data.