Dubai: All eyes will be on Bank of England (BoE) this week, in hopes that Governor Mark Carney will announce steps to soothe frayed nerves following last week’s sell-off in equities.
“After the Brexit vote, the general sentiment in the market is very fragile and hence we are seeing that the central banks are trying to assure the market they are ready to provide their support,” Naeem Aslam, chief market analyst with Think Forex said. “Central banks would keep assuring that more money would keep coming in, and that could keep the equity markets supported,” Aslam said.
Markets as a whole ended the week down, however on Friday, the Stoxx Europe 600 Index bounced back 1 per cent after registering its biggest weekly decline in two months. Germany’s DAX stock index rose 2.24 per cent to lead the region’s bourses. MSCI’s all-country world stock index rose 1.03 per cent. The main gauges in the US rallied, ending more than 1 per cent, after posting better than expected jobs data putting them in striking distance from the all-time high.
Investors are hoping the momentum will continue and stimulus from the BoE would help that.
The Bank of England’s monetary policy committee will meet on Thursday, when the central bank is expected to cut rates for the first time since 2009, and also take steps on injecting more liquidity in the system.
British pound
Investors will also be eyeing second quarter earnings for direction.
“Earnings would be in focus and that we would the driver in markets. We expect earnings to come in a lot better. We had a strong quarter. A weaker dollar would help export companies,” Aslam said.
Biggest casualty:
On the currency front, British pound, which has been the biggest casualty of Brexit, may witness more pain.
“Sterling is going to be in continuous pressure. We don’t think the bottom is in sight for the sterling,” Aslam said. “The pivot point for sterling would be $1.25.”
On Friday, the pound ended up 0.36 per cent at $1.2954 and almost half a per cent at 85.32 pence per euro, still down respectively 13 and 10 per cent since the Brexit vote on June 23. The pound touched a 31-year low of $1.2798 last week.
