Pound recovers as world supports Britain in spy case

The British pound recovered Friday from weakness prompted by a Russian decision to expel British diplomats, as the world rallied in support for London in a crisis sparked by the poisoning of a double agent, analysts said.

World stocks rose slightly at the end of a volatile week as fears lingered of a global trade war, tarnishing a positive economic outlook.

“Yesterday morning the pound fell on headlines that Russia was going to retaliate and expel British diplomats,” said Fawad Razaqzada, market analyst at Forex.

The pound then “started to recover” after the leaders of France, Germany and the United States blamed Russia for a nerve agent attack on former spy Sergei Skripal, saying there was “no plausible alternative explanation” for the assault.

“There is nothing like a Russian boogieman to bring EU and U.K. political adversaries together,” wrote Jasper Lawler, head of research at the London Capital Group.

European and U.S. stocks rose Friday, after Donald Trump’s appointment this week of Lary Kudlow – a supporter of the president’s “America first” agenda but who has criticized his tariffs move – appeared to limit worries of an imminent trade war, at least on the European front.

In Germany, the EU’s economic powerhouse, the DAX was up as shares in Siemens’ Healthineers unit surged after the industrial giant raised 4.2 billion euros ($5.1 billion) in an initial public offering.

For the bloc as a whole, the main event was the final eurozone inflation reading of 1.1 percent for February.

“Clearly whatever the [European Central Bank] ECB is doing to get that [consumer price index] CPI figure creeping higher isn’t working, news that helped send the ... DAX and CAC up,” said Connor Campbell, analyst at Spreadex traders.

Attention now turns to the Federal Reserve’s monetary policy meeting next week. A rate rise is expected but its statement and new bank boss Jerome Powell’s comments will be pored over for clues about future hikes with speculation it could announce three more this year.

“It’s shaping up to be arguably one of the most critical central bank policy events in some time as Jay Powell gets set to dictate the course of Fed policy for the remainder of 2018 and beyond,” said Stephen Innes, head of Asia-Pacific trade at OANDA.

AFP