Sterling suffers in uncertain times for investors, with City optimism for soft Brexit
- The Pound is down by 2%, this is good for exporters but a sure sign that confidence in the UK economy is down.
- London’s FTSE 100 index, whose companies generate roughly 70% of their revenues overseas, is up 1.0%. It also polishes earnings generated in foreign currency when they translate back into pounds.
- London’s more domestically focused FTSE 250 index, which generates around 55% of revenues from the U.K., is down 0.6%.
- Companies who generate the bulk of their revenues in the U.K., including Lloyds Banking Group, Taylor Wimpey and Barratt Developments are down 3.4%.
- The mood in the City seems to be holding out hope for a softer Brexit with many commentators pointing to a softer approach from the DUP.
- 10-year gilt yields have risen 2.5% to 1.057%, but they remain nearly 15% down year-to-date.
- Inflationary pressures remain subdued but further weakness in sterling could prove inflationary and hurt returns for longer-dated gilts.
- In other news, UK industrial output increased for the first time in four months in April, according to official data released today. Total industrial production – which accounts for around 15 per cent of economic output – grew by only 0.2 per cent over the month. This was much slower than experts were expecting.
- Consumer spending will also be closely watched over the next few months as analysts seek to understand the national mood.