European Stocks Mixed, Sterling Launches above $1.4250

24 Feb 2021 · 3rd Party Analysis

WRITTEN BY ThorFX

In Summary

  • European markets modestly higher, UK’s FTSE pressured
  • British pound pushes higher, supported by the positive economic outlook

European equities are trading fairly muted and struggling for direction in the early trading hours of the session on Wednesday. The German DAX pointing slightly to the upside, up around 0.50% alongside the CAC40 up some 0.10%. The UK’s FTSE100 is trading in negative territory, down by 0.50%. US futures appear to hold near the levels reached yesterday after the speech of Federal Reserve Chairman Jerome Powell. US stocks rallied yesterday, following Mr. Powell’s testimony but the positivity and the buying momentum are so far not carried over in premarket trading. Futures tied to the Dow Jones Industrial Average, the S&P500 and the Nasdaq Composite are trending slightly lower as investors balance the risk of stronger inflation driving global rates higher. Meanwhile, Fed Chair Powell pledged to continue to support the central bank’s monetary policy and asset purchases as a way to keep the US economy afloat.

The support provided by the Fed to the US markets under the loose monetary policy remains challenged by the current environment. At present, investors are concerned about where inflation will take the markets and where the treasury yields are going to arrive. While Mr. Powell’s words comforted US stock investors, the Asian session on Wednesday looked rather weak and the markets across Europe are trying to stage a recovery from yesterday’s modest losses.

Meanwhile, the Great British pound keeps breaking new highs against its peers across the currency market. Strong buying momentum carried the UK currency this morning to a new top against the US dollar as the GBPUSD traded around 1.4250. The GBPJPY is also higher, arriving at a two-year top, currently hovering near the 150.00 mark. The GBPCHF is trading to the upside for a ninth consecutive day today, reaching near 1.2900.

The multi-month highs in the sterling come on the back of increased hopes for a quick economic recovery in England as the country unveiled its lockdown exit plan on Monday. Prime Minister Boris Johnson praised the efforts to tackle the pandemic as the vaccination program continues to accelerate. Besides, the Covid-19 threat subsides with the UK reporting a decrease in daily confirmed cases and hospitalization rate.

Given the optimistic outlook based on expectations that the UK will relaunch its economy before the summer, traders and investors piled heavily onto the British pound in late Tuesday. The move to the upside has consolidated around its peak while market participants remain hopeful the worst of the pandemic is behind.

Elsewhere, the cryptocurrency market is trying to stage a comeback. A substantial pick-up in buying momentum pushed the price of bitcoin above the $50,000 mark early on Wednesday. The number one coin dropped below $44,000 yesterday as the whole crypto market dived, following the slump in global stocks. Bitcoin is higher by nearly 15% from yesterday’s low with Ethereum, the second-largest coin, also pointing to the upside today, up 20% from its lows. Ethereum is currently trading near $1,700.

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