Sterling bounces above 1.35 on the back of rumors that Theresa May was about to inform the European Union that Britain is prepared to stay in the Single market after Brexit. What can we expect? This 17 May Sterling Trading Outlook explains.
17 May, ADS Securities – The UK currency has been trading sideways for the past few days amid strong Dollar flows and what was behind the Pound’s strength has been one of the most intriguing debates among traders. It seems that this is a positive step in the Brexit process, however the longer term effect of this development is still in question.
17 May Sterling Trading Outlook
The slowdown in British finances in recent weeks has forced the Bank of England to downplay any chances for an imminent rate hike. Even though there are still big names out there suggesting that the BoE will have to pull the trigger at least once this year the current market consensus is that such an event is still far away at this time.
As such, Sterling’s price action hinges more on fresh data and Brexit-related news rather than central bank policy which suggests more uncertainty and lack of direction in the medium term.
The next 48 hours are mostly empty of any tier-one reports so currencies and equities will likely take their cue from US yields. The benchmark 10-year yield doesn’t seem to slow down its ascent climbing above 3.10% keeping the Dollar supported along the way. There was a minor pullback in the greenback late last night but this morning the US currency is back in action pushing the Euro below 1.18 again and driving Dollar/Yen towards the 111 area.
Asia Equities Markets
Equities in Asia are mixed this morning following a lackluster session in the US which however saw most bourses ending the day above water. The European and US futures are trending to the downside at this time indicating traders’ hesitation to bet big on stocks amid a bull market in the US Treasury yields.
We have called for a consolidation in global stocks in our previous reports as it seems that stock traders need a fresh catalyst to provide direction; a development in the geopolitical arena would be the ideal spark but until we get something new more sideways trading is expected.
ADS Securities Risk Disclaimer
This article was provided by analysts of ADS Securities.
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