Summary:
- GBPUSD drops to lows $1.29s and below 200 DMA
- Tory leadership rule change imminent?
- Dax hits 2019 highs despite business leaders gloom
The pound on the whole is little changed on the day, but the most popular sterling cross continues to fall lower with an appreciation of the buck sending the GBP/USD rate down to its lowest level since the middle of February. The FTSE has pulled back a little after hitting its highest level of the year yesterday, but equities in general remain in a bullish mood with the German Dax shrugging off a soft data point this morning to hit new 2019 highs while US stocks remain within striking distance of their all-time peak.
Tory leadership rule change imminent?
The announcement of a 1922 Committee meeting later on today has further fuelled speculation that the influential group of the Conservative party are set to change their rules on the frequency of leadership challenges in a move that could spell the end of PM May’s tenure. The current rules stipulate only one challenge every 12 months, which effectively means that unless Theresa May resigns she will remain at the helm until December - and crucially past the current 31st October Brexit deadline. While rising levels of dissent against the PM from her own party has been readily apparent for months there is a sense that she has not only gone past the point of no return but that even the promise to stand down once Brexit is delivered is not enough to pacify those calling for her to resign. This could have a significant impact on the pound and with May’s replacement almost certainly to be more of a hardline Brexiteer the risks are skewed to the downside.
The GBP/USD has dropped to its lowest level in over 2 months this morning and in doing so price has taken out both prior support around 1.2975 and also the 200 day SMA. Source: xStation
Dax hits 2019 highs despite business leaders gloom
There’s been further gains seen in German stocks today, with the DAX30 hitting its highest level since October 2018 and moving back above the 12300 mark despite a gloomy view on the economy from business leaders. The Ifo Institute’s business climate indicator dropped to 99.2 for April, marking the seventh time in eight months that this measure has fallen and serves to further raise questions as to the sustainability of the rally seen in stock markets so far this year. The most widely cited reason for the global rally seen year-to-date is a marked improvement in sentiment due to a dovish shift amongst central banks and hopes that US-China trade tensions will be resolved amicably, but these latest surveys suggest that business leaders remain less optimistic than the financial markets and there’s only so long the latter can rally if the former doesn’t change its tune.
