The pound took a dive as the UK’s GDP grew 2.4%y/y in the second quarter, lower than 2.6% expected. Hence, expectations for a BoE rate hike are being pushed further down the road.
We see swings and roundabouts once again in the FTSE constituents with the index regaining the 6000 level yet again and all sectors in the green.
The weakness in pound and the recovery in commodities should be supportive of the FTSE stocks today. Nonetheless, gains remain fragile as the FTSE is still swinging on high volatility in what are fast becoming bear market conditions.
The pound approaches the oversold market conditions against the US dollar. But offers pre-1.52 will certainly continue challenging the upside attempts on UK’s disappointing economic performance in the second quarter. Key resistance is seen at 1.5250 (Fib 50% over the last six months & support turned resistance) and a large 1.5250-strike vanilla put will also be expiring today. Some more vanilla puts are waiting to be activated at 1.5100/1.5070. Trend and momentum indicators are negative and suggest an extension to this critical zone of 1.5100/ 1.5087 (Fib 61.8%). Approaching 1.50 mark, possibility of dip-buying to build mid-term long position.
The brutal sell off in European markets on Monday has also been tempered this morning with supermarkets outperforming and a rebound in automakers aided by China cutting taxes on small cars. Materials are the second best performing sector this morning.
With trade at the top of the agenda, expectations for a smooth running G7 Summit were low even before the meeting started. A