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GBP rebounds quickly after London terror attack
We have a relatively quiet day ahead in terms of scheduled economic releases, but with a key vote taking place in Washington over US attempts to reform healthcare, traders will be anxiously watching to see how this progresses. Critically, US equity markets appear to have priced in every possible shred of good news, but without these changes being delivered, the hoped for tax breaks have little chance of materialising. Equities globally could be in for a choppy run towards the weekend break. 
The Traders’ View
Our prop desk snapped up exposure to crude oil off yesterday’s lows, whilst a long cable position from earlier in the week also continues to grow in profitability. Short interest on US equity indices remains, with these positions now profitable.
Fundamental Analysis – GBP rebounds quickly after London terror attack
Yesterday’s presumed terrorist attack in London initiated some weakness for sterling crosses but this proved short lived and we’re seeing further gains for the pound as the European session gets underway. UK retail sales readings are due to be released at 9.30am this morning and these have the potential to provide some further meaningful direction for the currency. Although rising inflation should lend support here, this may be countered by growing uncertainty amongst consumers over the economic outlook. As a result there’s the potential for a fair degree of variance here – forecasts are for a 0.4% gain, but any shortfall could result in some quick profit taking, especially with GBP/USD having pushed beyond 1.2500 for the first time in a month.
Yesterday’s oil inventory readings showed further robust growth in crude stockpiles with another 5 million barrels being added in the US alone. This served to push crude prices lower, with the US front month contract briefly hitting levels not seen since last November although there has been a notable rebound. Consensus appears to be that Opec will continue with the quotas introduced at the start of the year and this seems to be sufficient at least for now to draw a line under any weakness. However with those low break-even prices we are seeing reported on shale extraction, its easy to see how further weakness could materialise here in the longer term.
US equities could find themselves under renewed pressure later today when a Trump-inspired healthcare bill goes to a vote in Congress. We’re already seeing growing disquiet over the length of time the new administration’s promised reforms are taking to deliver and the thinking is that failure to see today’s vote carried will give traders another excuse to book further profits. At these levels it’s difficult to justify equity valuations even if all Trump’s policies can be implemented without compromise.  

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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