Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

Pound and FTSE under pressure in nervous markets

Pound and FTSE under pressure in nervous markets

Mining shares led the FTSE 100 lower on Monday morning, while the pound came under increasing pressure amid data showing speculators have been attacking the currency and comments from a senior Bank of England policymaker reinforcing sterling’s weakness.

With the US stock market closed for the day and small falls from European shares – Britain’s FTSE 100 fell back three points to 6,325 – attention was firmly on currency movements in the wake of last week’s G20 meeting.

The pound dropped 0.3% to $1.5474 after a report from the US Commodities Futures Trading Commission showed that more speculators are shorting – betting the pound will fall – than buying it.

The pound was also guided lower by comments from Bank of England policymaker Martin Weale who said that a falling pound may be the only fix for Britain’s swollen budget deficit.

William Poole, a foreign exchange strategist at FC Exchange, explained: 'By stating that “the most natural means of resolving the problem (of our stagnant economy) is for the nominal exchange rate to fall” Weale has made markets suspicious that the BoE may actively weaken GBP in what is a bit of a breakaway from their usually conservative rhetoric.

'We don’t see this happening outright, but given how vulnerable the pound is at present, it doesn’t take much to give it an extra nudge downwards. Policy makers are certainly proving quite tactful at the moment in their wording but we think that is as far as it will go,' Poole added.

Sterling has come under growing pressure so far this year amid concerns about the strength of the UK economy, especially in comparison to tentative improvements in the eurozone.

Jane Foley, a strategist at Rabobank, said: ‘The road to recovery is set to be slow and painful and the current loss of faith in the pound is not without good reason'. 

The Japanese yen fell even further, off 0.6% to 94 yen per US dollar, after the G20 meeting ended without any real censure of Japan’s policies to weaken the currency.

On share markets, miners led the FTSE lower. Antofagasta (ANTO.L), Vedanta (VED.L) and ENRC (ENRC.L) all fell by around 1.5%, to £10.99, £12.77 and 395p respectively.

ITV (ITV.L) was the biggest riser, up 3% to 120p on news reports of a bid for the company

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Brewin's Foster: the world’s most unconventional monetary policies

Brewin's Foster: the world’s most unconventional monetary policies

In this week's podcast, Guy Foster asks why the world’s biggest economies are pursuing some of the world’s most unconventional monetary policies. 

Play Charles Tan on Woodford & hidden trust income gems

Charles Tan on Woodford & hidden trust income gems

Cantor Fitzgerald investment company analyst Charles Tan discusses Woodford Patient Capital and some of the income trusts slipping under the radar.  

Play Taxicab Tenner: SGPB Hambros CIO Eric Verleyen

Taxicab Tenner: SGPB Hambros CIO Eric Verleyen

In the second episode of our new series, Verleyen jumps on board a black cab and explains how hard it's become to find good valuation on the market.  

Wealth Manager on Twitter