20th May 2019
The pound suffered a record 10th straight day of decline against the euro as top analysts warned that mounting fears of a no deal Brexit or general election could send the currency sliding back towards three-decade lows.
Sterling extended its tumble after cross-party talks collapsed without a breakthrough and Theresa May agreed to set a departure date. Analysts fear her exit will trigger a chain reaction of events that could lead to a hard Brexit or an election that propels Jeremy Corbyn into Number 10. The two-week slump has wiped almost 3pc off the pound’s value against the euro and sent sterling sliding below $1.28 against the dollar to its lowest level since January.
The pound’s current losing streak versus the euro is the longest since its rival’s creation in 1999. It sank a further 0.5pc yesterday to a three-month low of €1.1397.
After the breakdown in cross-party talks, City forecasters are slashing their estimates for UK growth in the coming quarters. Brexit is “the problem that keeps on giving” for the economy, said Robert Wood, chief UK economist at Bank of America Merrill Lynch (BAML). He warned that intensifying uncertainty will hold down GDP growth, predicting a sharp slowdown from a strong 0.5pc in the first three months of the year to just 0.1pc in the second quarter and a little more in the third. The Wall Street bank also slashed its growth forecast for 2020 to 1.1pc from 1.6pc, representing a slowdown from 1.4pc in 2019.
FTSE 100 Trading Signals, Forecast and Prediction
On Friday the 2 hour support held well, though as it was moving up fairly steeply, the low was only at 7307 in the end. That has now risen to 7343 for today, and a second test of that moving average should indeed hold. I am still expecting a rise towards 7380 in the near term, and we have a few resistance levels at this area for today, including a fib level and R2. As such if we get a rise to here this morning I can see a dip back down from there, towards the pivot at 7333, and that 2 hour support areas as well. Above the 7380 area then we are looking at a test of the 7412 level, and may well see the bears defend that area. With cable dropping off over the past 10 sessions, that has also helped to underpin the rise on the FTSE100.
Support wise, we have the 7345 2 hour as mentioned, then the daily pivot at 7333 below that. 7300 is then the 200ema on the 30min charts, and may well hold if seen being the round number as well. Should the bears break this then a test of the daily support at 7257 looks pretty likely, though there 2 hour coral line has gone green and is showing support at 7290. We are getting near the top of the Raff channels again, currently on the 20 day channel top at 7355, and then the 10 day higher up at 7420. As such, the longer term chart are showing some daily resistance. However, the greed/fear gauge is still on 36/100 (Fear) so the bulls have that on their side (buy when markets are fearful, sell when they are greedy).
On the Brexit front, reports around UK PM May’s Brexit bill differ, some indicate it contains improved measures others that it contains nothing new and retains the Irish backstop. On the news front for today, highlights include ECB’s Praet, Fed’s Harker, Clarida, Williams, BoE’s Broadbent and Riksbank’s Skingsley.
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