And so Gordon survives to fight another day. In reality the Parliamentary party had little choice as there was no credible alternative (and doesn’t that say everything). A new incumbent would have found it very difficult to avoid calling an election and the last thing Labour need right now is to go to the polls with their weaknesses and dirty washing still fresh in the mind.
It is not beyond the bounds of possibility that the economy will start to grow before next Summer and, if you ignore the massive public sector deficit and the growing unemployment problem, the Chancellor and Prime Minister would then be able to claim credit for turning things around. The opposition is essentially very weak as well with Cameron and Osborne signally failing to land any knockout blows at all in a period when Government incompetence on virtually every front is easier to see than to miss.
Unfortunately this makes the probability of a hung parliament next time around ever more likely.
Markets are responding to the late US move last night and the FTSE is doing its best to recover to attack the top of the trading range at 4500. Unfortunately the pressure is beginning to tell already (in the first hour of business) and 4450 seems to be just about the best it can do for now. Boring as it is to keep saying it but the range of 4300 to 4500 just keeps on confirming itself day after day. There is a new upward trend line forming from the lows of March which was confirmed at the lows yesterday (4365) and this may well define the move higher. It is moving higher by 15 points a day and so is now at around 4380 today. A break below this may well give bears another shot at the down side but you can guarantee an almighty battle if we challenge it.
Sterling has recovered some of the losses of recent days as the ‘confirmation’ of Gordon Brown at least gives some comfort of continuity. We bounced neatly off the ‘support’ at around the 1.58 level and then as mentioned in yesterday’s comment the breach on the way back up of 1.5960 triggered a swift rally in early action this morning as dealers speculated on a rejection of the trading range below this mark.
A marginally weakening dollar is helping the Pound recover some ground versus the other majors and Sterling/Euro is once again pressuring at the 1.16 level. The cross has struggled to hold above this level since the fall out late last year and bulls will be hoping that this time we can achieve a foothold on the way back up to respectability. The 1.15 to 1.16 region was a support even when we were collapsing back in Nov/Dec it formed the high tide mark in the abortive rally of February and is once again proving something of a barrier this time around. The fact that the rejection of a few days ago has not resulted in a swift reversal back below 1.12 and that buyers seem keen to ‘have another pop’ at the 1.16 resistance this morning may be significant. But, if we do not claim a break through in the next few sessions the odds will turn towards a retracement.
Gold is oscillating about the 950 level as traders try to get a handle on whether we need fear another flight to quality or whether the recent equity market rallies will continue through the summer and autumn. There is a reasonable chance of a return to the rising trend line support (from last Oct) at around 925 but the momentum (far all of the recent weakness) remains to the upside. The fortunes of the Yellow Metal will probably fluctuate with the dollar as we seem to have entered one of those currency/commodity eras where a move in the dollar causes an opposite reaction in Oil and Gold.
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