Sterling (GBP) & FTSE 100 Prices and Analysis:
- Central banks need to act to prevent further losses.
- UK and EU trade talks will be fractious and may end in June.
*** Please note the webinar recording cut off before the end – Many Apologizes ***
Central banks around the globe are likely to loosen monetary policy further as the coronavirus continues to drive markets lower. Last week’s sharp sell-off in the equity space, one of the largest percentage drops since the 2008 GFC, has put the onus back on the major central banks to come to the market’s assistance by cutting rates and boosting liquidity. If this happens, the real question is whether this will work as existing monetary policy has seemingly run out of magic bullets.
The UK and the EU officially kicked-off their trade negotiations today with both sides saying placatory words but refusing to budge from their already stated positions. The UK has said that it will leave the EU on December 31 with or without a deal, while UK PM Boris Johnson has also said that he wants to see progress in the talks by the end of June or he will switch his focus to a no-deal exit. As we stand, the opening stance of both sides is miles apart and will need a lot of work, and goodwill, from both parties to get anywhere close to deal.
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GBP/USD remains under pressure despite talk of a 0.50% US interest rate in the very near future. When interest rate cuts are flagged up, as is happening now, the majority of any movement is seen before the event, with only a small reaction when the rate decision is made. Both the Bank of England and the Federal Reserve are ‘live’, and they may not wait until their next official monetary policy meetings before cutting interest rates.
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GBP/USD Daily Price Chart (August 2019 – March 2, 2020)
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EUR/GBP continues to push higher and is now leaning against the 200-day moving average for the first time since early October. The pair will need to make a clean break and close above if this rally is to continue. The CCI indicator shows the pair as overbought.
EUR/GBP Daily Price Chart (June 2019 – March 2, 2020)
The FTSE 100 hit its lowest level since the Brexit vote (June 2016) in weekend trade and today’s bounce-back is now being sold. The index is nearing the 61.8% Fibonacci retracement level of the February 2016 – May 2018 rally and needs to hold to prevent further losses.
FTSE Weekly Price Chart (November 2015 – March 2, 2020)