Dubai: Sterling will be watched closely on Monday, as investors wait to see if it continues its fall following last week’s election surprise.
On Friday, the pound shed more than 2 per cent against the dollar, dropping as low as $1.2636 (Dh4.6374) before trimming losses. The Pound recovered to 1.3040 against the dollar for the week, recovering on the back of strong data out of the United Kingdom.
“Traders would start building pressure on sterling on Monday. The selling momentum for the currency would continue to where it left off on Friday post the elections,” Naeem Aslam, chief market analyst with Think Markets told Gulf News.
First Abu Dhabi Bank also agreed to the view.
“In the short-term pressure remains on the currency [pound] due to the result that could derail the while idea and process of Brexit,” said Claude-Henri Chavanon, Head of Products & Services Wealth & Private Banking at First Abu Dhabi Bank.
“The currency has recovered from last year’s lows but we now enter the corridor of uncertainty with respect to Brexit negotiations and how this will play out in the months ahead,” Chavanon said.
Fed meeting
Stock markets around the world will also be watching the Federal Reserve Bank meeting later in the week. The Fed is widely expected to raise rates by 25 basis points, a move that could damped investor enthusiasm.
“In the run-up to the meeting, I think dollar strength will come back. Pound already formed a top 1.30 levels. Pound should target 1.20 levels,” Phaneendar Bhavaraju, an independent currency trader said.
A weaker pound could help sentiment in the FTSE 100, which comprises mainly of global companies.
“Investor would be looking at bigger the picture, which is a softer Brexit, and weakness in the currency would help FTSE 100,” Aslam added.
The FTSE 100 hit a record high in late May, after gaining 24 per cent since last year, a stellar performance post Brexit.
“The longer-term, performance will be dictated by how the Brexit process evolves, but we would put aside political uncertainty and focus on the composition of the FTSE 100 to ascertain where the Index is headed,” Gary Dugan, chief investment officer at Emirates NBD said.
Elsewhere, on Friday. the Nasdaq 100 closed 2.46 per cent lower after a record breaking run in US technology shares this year finally saw some profit taking. The Dow Jones Industrial Average closed 0.35 per cent higher at 21,207.
Factbox: Oil prices support
Oil prices may get a lift due to seasonal demand in the United States.
“The combination of supply destruction worries as oil approaches the mid-$40’s, rising demand as we approach the traditional strong third quarter demand period, and the risk of a Middle East escalation is likely to attract support,” Ole Hansen, head of commodity strategy at Saxo Bank said.
On Friday, Brent crude closed up 0.61 per cent at $48.15 per barrel, while West Texas Intermediate closed 0.42 per cent higher at $45.83 per barrel.
