Financial market research and analysis

The pound sold off aggressively at the London open, as UK Prime Minister Theresa May announced the decision to trigger the Brexit by March 2017, aiming to leave the European Union (EU) within two years.

May’s announcement suggested that the UK may be leaning towards a so-called ‘hard Brexit’. This could take away the flexibility that the markets would need to digest the post-Brexit changes, and could abbreviate the time that businesses would need to adopt to the new configuration, hence could compromise a smooth collaboration through the sore procedure of a divorce between the UK and the EU markets.

GBPUSD tanked to 1.2846 in London. The better-than-expected manufacturing PMI tempered the morning sell-off, as data suggested that the UK’s manufacturing activity in September picked up faster than anticipated (55.4 vs. 52.1 expected). The softer pound appears to support the UK’s manufacturing business, despite Brexit uncertainties.

The FTSE 100 opened the week on a positive note, after having tested the 6808p level on Friday’s heavy sell-off.

The UK’s mining and energy stocks lead gains in London, on the back of firmer oil and commodity markets.

Financials remain under pressure although the tensions in the stock markets have somewhat eased on news of a reduced Deutsche Bank settlement with the US Department of Justice. Still, financials continue operating in a tense environment, given that either party hasn’t yet confirmed the news.

The DAX is closed today due to a Bank Holiday in Germany.

Fed to face challenging times

Recent developments in the banking sector, combined with rising tensions within the interbank space, could hold the Federal Reserve (Fed) back from raising its rates by the end of 2016.

The markets presently price in a 60% chance for a 25 basis points hike at the December meeting.