LCG: O2 merger takes BT breath away, pound up after BOE – With Jasper Lawler, Head of Research

 

08:59am BST | May 7th 2020

The British pound has popped higher after the Bank of England decided to keep interest rates on hold. A surprising annual rise in Chinese exports has bolstered overall sentiment but more heated language directed at China from US is a rising source of anxiety. Stock markets had taken a turn for the worse on Wednesday when private payrolls data showed over twenty million Americans lost their jobs in April.

Bank of England

The Bank of England has held rates at a record low of 0.1%. The decision not to expand bond-buying with more printed money gave the pound a small uplift. Two dissenting votes for an extra £100 billion in quantitative easing capped the gains. It’s a wait-and-see for now but the path of least resistance at the BOE seems to be for more stimulus.

Shares

Shares of Telefonica rose in reaction to its deal with Liberty Global to merge O2 and Virgin Media in the United Kingdom. It creates a new telecoms power house to compete with BT. The combination will bring extra bargaining power to potentially achieve what the two entities by themselves never could. Ofcom might finally order the breakup of BT and Openreach.   It was a double whammy for BT shareholders: the emergence of a huge new rival and the suspension of dividends for two years.

Forex

The pound has risen over the euro (GBP/EUR) in reaction to the BOE decision to leave its bond buying program at current levels. No extra UK money printing for now means the pound has an edge over the euro, which faces a small but rising risk of breakup after Germany’s constitutional court questioned the proportionality of its actions. The biggest downside risks for Sterling are a more sustained risk off mood in markets and the UK falling further behind in exiting lock-down.
This part is for your colleagues and friends

Do you think that your colleagues of friends might find this type of information useful? If so, please forward them this email and let them subscribe by themselves. If not, please continue reading.
Subscribe

Commodities

The price of oil is down following a rise in US inventories that saw storage capacity returns re-emerge. It’s a pullback from a two-weekly rally that carried Brent crude to just short of $30 per barrel. Gold is holding steady near $1700 per oz before Friday’s big US jobs report. Copper just hit a 1-week high helped by China exports.Opening callsDow Jones is set to open 182 points higher at 23,846 S&P 500 is set to open 25 points higher at 2873

Chart: GBP/EUR
Upside in the British pound has been capped at 1.15/152 for the last three weeks.

Kind Regards,
Jasper Lawler Head of Research
@jasperlawler
 

Tags

, , , , , , , , , , , , , , ,

Related Posts

About the author

Jasper delivers regular commentary, seminars and webinars on market news, trading analysis, strategy and psychology. He is regularly interviewed by BBC News, Bloomberg, CNBC and Sky News, and has featured in The Times, Guardian and Daily Telegraph. Jasper hosts a weekly charting analysis webinar. He is qualified as a Chartered Market Technician (CMT) with the Market Technician Association, and has a degree in Finance and Economics.