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Pound drops as hopes of an interest rate rise are dampened

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The FTSE is up 40 points in early trading in response to the Pound’s overnight fall and Dollar weakness boosting commodities prices.

The FTSE has also been boosted by corporate news this morning. Accendo Markets Analyst, Mike van Dulken commenting “Burberry 3% underlying retail revenue growth in Q1, helped by stronger demand in mainland China and continued good UK performance.”

“Barratt Developments says it expects FY 2017 profits ahead of expectations with its highest number of completions in nine years.”

“The CMA has warned about the competition impact from a Tesco-Booker merger and JD Wetherspoon has benefited from recent good weather.”

The Pound, meanwhile, dropped overnight following Bank of England Deputy Governor, Ben Broadbent’s comments yesterday that he doesn’t see a rate hike soon. ADS Securities Analyst, Konstantinos Anthis suggested “The British policymaker mentioned that there are still issues to be considered before the BoE should look to raise rates suggesting that it’s still too early for a possible change in policy.”

“…traders are expected to readjust their positioning now that expectations for a rate hike are diminishing and the Pound will likely come under more pressure in the coming sessions”

However, there may be a temporary reprieve for the UK’s currency with employment figures due out this morning. “today’s employment data will be key in arresting the decline or further accelerate it. Wage growth is expected to slow but there are hopes for a healthy correction in the unemployment rate that would slow down the decline in the currency” he added.

Over in the US, equity markets recovered from their Trump Jr. email exchange inspired blip to close around breakeven. Mike van Dulken noted “The latest episode in the Trump-Russia saga put Financials on the backfoot as investors question its impact on pro-market policies including Tax reform and sector deregulation.”

“The sector underperformed on the S&P500, while Healthcare names weighed on the Dow Jones. Tech continued recent outperformance, helping the Nasdaq 0.3% higher.”

This afternoon, Fed Chair, Janet Yellen, is giving her semi-annual testimony to congress with Konstantinos Anthis noting “Fed President Yellen’s testimony in Washington today is regarded as an important piece of the puzzle for dollar traders in an attempt to assess the currency’s short-to-medium term outlook.”

“Yellen’s testimony will be key in instilling confidence back into the pro-dollar trade; manufacturing and services activity is rising and the job market is improving further so there’s little reason for Yellen to deviate from her optimistic views over the US economy.” he added.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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