The FTSE 100 has been given a boost by the dip in the pound. 

Europe

Sterling has tumbled in the wake of the latest Bank of England meeting, where interest rates were kept unchanged. The UK central bank also lowered its forecast for GDP and wage growth.

RBS has provisionally agreed to pay a $4.9 billion fine to the US Department of Justice (DoJ) in relation to financial products that were sold in the run up to the credit crisis. Two years ago, traders thought the fine was going to be in excess of $12 billion. The share price has been given a boost as some clarity has been provided on the outstanding fine. The government still owns 71% of RBS, and once the DoJ matter has been put to bed, it could pave the way for Westminster to reduce its shareholding in the bank. RBS posted its first full-year profit since the credit crisis in February, and now it has taken one step closer to drawing a line under the DoJ issue. The share price has been pushing higher since mid-2016, and if the bullish move continues it could target 304p.

Next shares are in demand after the fashion house revealed it has made a strong start to the year, and also lifted its guidance. In the first three months the retailer posted a 6% rise in sales, which easily topped the 2.7% growth analysts predicted. Next saw a respectable increase in online sales, which offset the drop in footfall. The raised outlook for the end of the year was the icing on the cake, especially when other fashion outlets are struggling.

BT has announced an aggressive cost-cutting plan in order to pay down its pension deficit and maintain its dividend policy. The company plans to cut 13,000 jobs and sell-off non-core offices. The telecoms company is even selling off its London headquarters in a bid to raise funds. Investors have viewed the vigorous cost-cutting scheme as a sign the company is finding it difficult to keep its head above water. The stock is down 7.7%.

US

The major US indices are higher today as the positive run continues. The Dow Jones and S&P 500 have reached new multi-week highs, while the NASDAQ 100 hit a level not seen since late March. The geopolitical mood hasn’t really improved, but more importantly for investors it hasn’t deteriorated either.

US annual headline inflation ticked up to 2.5% to meet expectations, but on a monthly basis the reading came in at 0.2%, while economists were expecting a reading of 0.3%. The yearly core inflation figure held steady at 2.1%, but economists were expecting 2.2%. The core reading is a better measure of demand, and the latest figures suggest demand isn’t as strong as the market was expecting.

FX

The mixed US inflation report prompted traders to sell the greenback. Yesterday the US dollar index hit a new high for 2018 and dealers are using today’s report as an excuse to lock in their profits.

EUR/USD benefited greatly from the sell-off in the US dollar. The single currency has been in a clear downward trend since mid-April, but it’s now bouncing back. Earlier today, Italy posted industrial output figures for April which showed a 3.6% jump in output on an annual basis, comfortably exceeding the 2.4% forecast.

GBP/USD is lower on the session after the BoE kept interest rates unchanged. The monetary policy committee voted 7 to 2 in favour of keeping rates on hold. The UK central bank also trimmed its 2018 GDP forecast from 1.7% to 1.4%, and the wage growth outlook was lowered to 2.75% from 3%.

Commodities

Gold has been lifted by the soft US dollar and the metal hit its highest level in over a week. The 200-day moving average at $1,306 continues to act as support, and while gold is above that metric its outlook could be positive. Gold has been range-bound recently, and the $1,350 region may act as resistance.

WTI and Brent Crude oil are lower today after profit-taking set in. The energy market has been strong recently after President Trump withdrew from the Iranian nuclear deal, and now traders are worried about supply levels. The US is looking to impose sanctions on Iran, and the oil-producing nation could see its energy exports hit.

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