Will the weakening pound be a drag on the British stock market?

Yesterday’s data on US retail sales managed to prop up the US dollar. Traders again believed that the Fed’s FOMC will still raise rates this year. How long will this belief last? The probability that the rate will remain unchanged is now 94.4%. Judging from the open interest, traders are still increasing their short positions in the USD. Technically, the EUR/USD pair is forming a classic flag. It is therefore quite possible that we will again see the bulls’ counterattack. Two news items will fundamentally affect the market today – the number of new construction permits and the minutes of the Federal Reserve System meeting.

Meanwhile, discussions of the UK’s future interactions with the EU after BREXIT in March 2019 continue in Brussels in 2 weeks. At present, Great Britain is naturally trying to extract the greatest benefit from the “divorce.” In particular, David Davis’s department is trying to preserve the UK’s ability to enter into trade agreements with other countries. In the long term, the EUR/GBP pair might just achieve parity. In the short term, the situation also favors the bulls. Technically, resistance is at 0.9150. The weakening pound is supporting the British stock market, which has been feeling pretty good the last two days. The FTSE-100 broke away from the support at 7300 and is in positive territory. The 9-day moving average along the 7410 boundary is standing in the bulls’ path. But it is possible that this obstacle will be successfully overcome.

Gold lost value for a second day on the slight decline in tension over North Korea. As we noted in our previous reviews, the formation of a classic triple top might give the bears confidence. But if you are planning to “put on shorts,” the stop could be a little above $1300. The metal may just end up in this range, for example, with the start of military exercises by South Korea and the United States.

Nikolay Dudchenko, exclusively for Olymp Trade