Sterling vulnerable as PM May poised to outline Brexit strategy

Bloomberg

The pound’s rally, spurred by the Bank of England’s hawkish rhetoric, may be vulnerable to heightened sensitivity to economic data and Brexit uncertainty this week.
Sterling rounded off its biggest weekly gain in five months against the dollar, reaching its highest level since just after Britain’s
European Union referendum as UK policy makers spurred speculation of an interest-rate increase within months.
While a speech by BOE Governor Mark Carney and retail-sales figures may influence pound moves earlier in the week, Prime Minister Theresa May threatens to steal the show when she unveils her approach to Brexit on September 22.
The currency’s one-week implied volatility against the dollar climbed the most in the world in the five days through Friday.
The UK currency is the world’s best-performing major against the dollar so far in September as BOE policy makers say some withdrawal of stimulus may be needed “over the coming months.”
Still, with May due to speak in Florence, Italy, about Britain’s exit talks with the EU, traders will scour her comments for clues on progress on any transitional deal and the UK’s separation payment, which is needed before trade can be discussed.
“The medium-term narrative for the pound will continue to be dominated by Brexit and here May’s speech in Florence will be key,” said Viraj Patel, a currency strategist at ING Groep NV in London. “If her speech doesn’t address the near-term obstacles such as the divorce bill and transitional arrangements required to move on to the next stages of the Brexit talks, then the uncertainty factor will continue to weigh on sterling in the near term.”
The pound climbed about 3 percent last week to $1.3594. It reached $1.3616 in intraday trading, its highest level since June
24, 2016, the day after Britain’s
EU vote.
The currency’s one-week implied volatility rose more than three percentage points last week to 11.5 percent. Against the euro, sterling rose 1.2 percent.
Following the UK currency’s outperformance, BNP Paribas SA recommended fading the rally.
“The pound’s sensitivity to data should rise because the BOE’s message now has a lot of scope to shift around in response to data,” said Sam Lynton-Brown, a strategist at BNP Paribas SA in London.
“Growth will surprise materially to the downside versus the BOE’s forecasts in the August Inflation Report, which will ultimately prevent them tightening anywhere near as much as they’ve signaled.”

S&P 500 at 2,500, a latest milestone
Bloomberg

The relentless bull market in American equities capped another milestone, with the S&P 500 Index topping 2,500 for the first time.
It’s just the latest accolade for the second-longest bull run in US history, a surge that’s added almost $20 trillion to the value of American equities. While the streak needs to last 11 more months to claim the duration title, it is racked up a number of
impressive statistics.