Market Comments On The Strength Of Sterling
Chris Beauchamp, Chief Market Analyst at IG, discusses the strength of sterling.
“The FTSE 100 has tiptoed lower in early trading, but yesterday’s powerful move higher is still largely intact.
“Stock markets have edged back from the highs seen yesterday, but the broader recovery remains intact, as investors continue to find the positives.
“The triple-whammy of Fed Chairman Jerome Powell’s weekend comments, progress on the vaccine front and the first hints of a pan-EU response to the crisis all bolstered risk appetite, as markets continued to ignore the growing toll of job losses and the continued dire run of economic data.
“The UK employment picture has worsened markedly, with a sharp rise in the claimant count and a fall in wage growth, although at least for now the actual unemployment rate has not begun to skyrocket in a similar fashion to the US.
“All this proved to be a short-lived boon for the pound, which succeeded in building on yesterday’s gains against the dollar. But UK economic data is not immune from the worsening trend, and with Brexit talks going badly, it seems the optimism surrounding sterling will not last.
“Imperial Brands had been in steady decline long before the coronavirus crisis, having achieved the dubious distinction of underperforming the FTSE 100 since 2017. Now, with the dividend cut by a third, the reasons to stay with the shares have got weaker once again.
“Today’s update provides little reason for the shares to play catch-up with the broader market, especially with the pace of debt reduction slowing as well.”