GBP sheds most of today's gains as relief rally falters

Friday, September 19, 2014

European markets held on to early gains throughout the session as investors welcomed the continued unity of the UK after the final results showed a No vote won with 55.3%. London’s blue chip index found firm support at yesterday’s close as the relief rally extended gains towards a two week high, hitting 6,876 early on. Wider European markets were also buoyed higher as previously side-lined investors returned to equities with a renewed appetite for risk.

The pound sterling rallied to its highest levels since the start of the month as investors reacted positively to the Scottish vote results. After reaching a year to date low of 1.6052 earlier this month, the pound recovered significant ground against the dollar with yesterday’s session seeing the currency close just shy of 1.6400. Activity early on this morning saw the pound rally to a two and a half week high as the currency high 1.6525 before selling off back down towards 1.6350 as dollar held firm.

Front month Brent futures struggled to build on gains accrued earlier this week as a continuation of selling pressure saw futures exhibit further weakness as contracts for October expiration opened slightly below yesterday’s close and traded towards $97.20. Downward pressure remained firm throughout the session and futures are currently trading around their opening levels, bringing total losses for the month so far to 5.5%.   

After the DJIA and S&P 500 reached record highs yesterday on the Fed’s pledge to keep interest rates low for a “considerable time”, both indices traded higher from the open, extending the previous sessions gains and propelling the S&P 500 on track to gain 1.3%% higher on the week, recovering all of the previous week’s losses. In the coming week, investors will have Chinese manufacturing PMI data as well as US durable goods and Q3 GDP data to provide further catalysts for a potential move higher.  

Alibaba, the Chinese ecommerce behemoth, was priced at the top end of its IPO range today, with shares priced at $68. With US investors bullish on Chinese growth, in contrast to most Chinese investors who believe growth prospects are slowing given the recent macro data, we could see further IPOs in the coming year as 2014 shapes up to be a banner year for US initial public offerings.

Sterling pares back early gains

GBP Curncy British Pound Spot 2014 09 19 15 39 49

Brent futures remain under pressure on stronger dollar

CO1 Comdty Generic 1St CO Fut 2014 09 19 15 40 09

Topics: GDP, Crude oil, Brent, GBP
More from: Kash Kamal