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Powell pushes dollar higher

Stock markets in Europe are directionless as there has been no major news to inspire investors. 


The lack of major macro-economic news has led to a day of relatively small trading ranges. The recovery that got underway a couple of weeks ago is still intact, it just hasn’t made any major headway.  

Shares in Sky soared after Comcast launched a £22.1 billion bid for the company. Sky is already in the crosshairs of Rupert Murdoch, who owns 39% of the company, and is keen to buy the remaining 61%. Mr Murdoch is bidding 1075p per share, while Comcast are offering 1250p.

The UK regulator is currently investigating the Murdoch bid, and the body has expressed concerns about the family owning a relatively large amount of the British media. Sky shares are up 19.8% at 1324p, and reached their highest level since 2000 today, so dealers are clearly optimistic.

Standard Chartered continues to turn around its business, after full-year underlying profits jumped by 175% to $3.01 billion, above equity analysts’ prediction of a $2.97 billion profit. Cost were cut and loan impairments were down too, and they contributed to the jump in earnings. The bank restated a dividend, albeit a modest one of 11 cents. The last final dividend was in 2015, and that was 63.5 cents, but it it’s a step in the right direction. Earlier in the day the stock hit a 30-month high, but it has now turned lower. Should the wider upward trend continue, it could target 900p.

Provident Financial shares were given a major shot in the arm when the company announced a rights issue that was much smaller than initially thought. Yesterday there was speculation the company needed to raise £500 million, when actually it is seeking to raise £331 million. Profits fell by 67% to £105.5 million – which was broadly in-line with market consensus. The share price is up a whopping 70% – a six-month high.


US equity markets are also mixed, as traders listen to Jerome Powell, new chair of the US Federal Reserve, testify in Washington. Mr Powell has been reasonably optimistic in his assessment of the US economy and traders are waiting for the dust to settle.  

Mr Powell stated that recent market volatility won’t derail further interest-rate hikes. He also pointed out that the US jobs market was healthy and wage growth was ticking up. Traders felt the statement was a touch on the hawkish side, as US fiscal policy was described as a new ‘tailwind’.

US durable goods in January fell by 3.7%, while economists were expecting a 2% decline. Keep in mind the December report showed a 2.6% increase. It is worrying to see a hefty decline in sales of durable goods as it points to weaker demand. 


EUR/USD went from bad to worse this afternoon as German inflation missed expectations and, then the Powell statement drove the US dollar higher. The EU-harmonised CPI rate in Germany fell to 1.2% – a 15-month low, and this is likely to weigh on eurozone rate as a whole, which could keep the European Central Bank’s monetary policy loose. The greenback was lacklustre in the morning, but the remarks from Mr Powell sent it higher.

GBP/USD was dragged lower by the rally in the US dollar. There were no major economic announcements from the UK today so sterling was at the mercy of the US dollar. The pound has been in an upward trend versus the US dollar since March 2016, and even though it is lower today, the wider positive trend remains intact.


Gold fell to a five-day low as the slightly hawkish comments from Mr Powell put pressure on the commodity. Lately the inverse relationship between gold and the greenback has been strong, and that is still the case. Dealers are concerned the US central bank could tighten monetary policy at a faster rate than expected. 

WTI and Brent Crude oil are under pressure as the jump in the US dollar is weighing on the energy market. Traders are looking ahead to the American Petroleum Institute report at 9.30pm (UK time), and the consensus is for a build in inventories of 1.1 million barrels. Traders continue to be concerned about oversupply now the US is producing at a record level.

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