The FTSE was down 5 points in early trading this morning as continued Pound strength against the Dollar held back the Blue Chip Retail and Housebuilding sectors.
The Dollar weakness stems from the Federal Reserve’s cautious tone on Wednesday having increased interest rates – and the US currency is now dealing with fresh tax reform complications. CMC Markets analyst, Michael Hewson explains, “The focus appears to be shifting to the possibility that the highly anticipated tax plan currently being drafted in the US may be on the point of starting to unravel a little after Republican Florida senator Marco Rubio said he would not vote for the package without some changes to some tax credits.”
“With only a slim majority it would appear that some senators might be starting to waver on some of the changes being proposed.”
However, the news for the Dollar isn’t all negative. A strong US economy appears to be offsetting investor concerns. FxPro analyst, Edward Anderson suggested “With inflation a somewhat “hot-topic” the US Commerce Department on Thursday released data showing US retail sales rose more than forecast in November and the previous month was revised higher”
The Pound, meanwhile, is back in focus today EU leaders discuss whether or not to move to the next round of Brexit negotiations. Spreadex analyst, Connor Campbell noted “Dependent on whether its announced in time, it’ll be interesting to see how much the pound moves on the expected formal confirmation from EU leaders that they’re ready to move on to the next stage of negotiations with the UK. And while the fact that it is almost a given at this point might dampen the sterling’s enthusiasm, considering it’s rocky December form the currency shouldn’t turn its nose up at any good news, however predictable.”
The US equity markets closed lower across the board on Thursday, with the Dow Jones breaking its 5-day winning streak as tax reform concerns dented sentiment. Accendo Markets analyst, Mike van Dulken commented “Despite Disney outperformance after striking a deal to buy a large chunk of Fox’s assets, the Dow closed lower as a plethora of other heavyweight stocks lagged, while the S&P 500 finished weaker as Healthcare and Materials sectors weighed.”