Tuesday Briefing: Volatility Suffocates the Pound

June 28, 2016

The pound continues to dominate Sentifi Top Attentions as a belief that it will continue the pattern of volatility is running amok in the market. This frenzy represents the true nature of the market in the post-Brexit world, with lots of uncertainty, lots of doubt and gloomy outlook. The storm in the financial market conjured by Brexit last week shows no sign of dying down, so expect other important stories on Sentifi to be related to Brexit. So read on, and trade accordingly.

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1/ GBP: Will get more volatile [6,655 messages in the last 24h]

The nightmare called volatility will not be over anytime soon for the pound, financial analysts believe. The advise for traders seems to be trading according to the volatility. The market can expect some stimulus from the European Central Bank sooner or later as it will attempt to maintain whatever stability that’s left.

2/ Barclays: Predicts a cut to cash rate in Australia [4,973 messages in the last 24h]

The bank has revered its thinking about RBA’s cash rate because of Brexit. (Rex Features)

Brexit has changed a lot of things, from the value of the sterling to the opinion of Barclays on the Reserve Bank of Australia’s monetary policy. Prior to the referendum, Barclays, along with other nine forecasters, said the RBA would keep the cash rate of 1.75% until the end of the third quarter. But now Barclays has had a change of heart with the opinion that Brexit will force a cut to the cash rate to 1.5%, the unexpected triumph of the “leave” campaign being blamed. With huge impact on the sentiment of the global market, adjustments to already thought-out plans are required, and that’s what Barclays believes in RBA’s case.

3/ George Osborne: Opts out of running to lead Tories [4,793 messages in the last 24h]

Calling himself “too devisive,” Chancellor George Osborne has crossed his name out of the running for the leadership of the Conservative Party. Meanwhile, Theresa May has gained more popularity than Boris Johnson, a candidate that Osborne is deliberating about supporting. The nominations will begin on June 29 and last until July 1.

4/ RBS: Shares hit crisis level [4,623 messages in the last 24h]

The post-Brexit world has been harsh to RBS as its shares plummeted 25%, the lowest since the financial crisis. It triggered the analysts to downgrade the bank and lower its earnings outlook. To cope with this tumult in the banking sector, the Bank of England is expected to cut the interest rates, which currently stands at 0.5%. This tough decision would make it harder for the banks to make profits.

5/ BOE: A rate cut is expected [1,890 messages in the last 24h]

If the BOE cuts the rates further, the move will be in line with the markets’ speculations the U.K. interest rate will not rise until the end of the decade.

The pound and the U.K. financial market got thrown into a storm of instability and volatility by Brexit, and now the market is looking to the Bank of England to inject some stimulus or at least a temporary relief. Many analysts are speculating about, and even demanding, a cut in the interest rates. The bank already cut the rates to a historic low of 0.5%, and the prediction is the bank will trim 25 basis points more off the rates.

6/EasyJet: Issues post-Brexit profits warning [1,139 messages in the last 24h]

Brexit has yet claimed another victim. EasyJet has predicted the costs will be higher due to oil and currency movements. The third-quarter profit before tax will be impacted by £28 million, and the third-quarter revenue per seat will likely go down as well. Second-quarter will also fall at least a mid-single digit percentage. Following the warning, the company lost 22.32% in its stock value.

7/ Medtronic Inc: Buys rival for $1.1 billion [764 messages in the last 24h]

The world’s biggest maker of heart-rhythm devices Medtronic has bought its rival HeartWare International in a $1.1 billion deal that pays $58 a share, which is twice as much as HeartWare’s closing price of $29.98. The deal is expected to close during Medtronic’s second fiscal quarter ending October 28. Medtronic expects HeartWare to help expand the offerings of diagnostic tools, therapies and services for patients.

8/ Lyft: May be up for sale soon [647 messages in the last 24h]

Lyft needs help in raising fund to compete against Uber.

The hiring of Qatalyst Partners, known for helping tech companies get acquired, by Lyft has ignited speculations that the ride-hailing company may be available for a buyout soon. It’s known that Lyft’s found it’s getting harder to raise funds from venture capitalists. But instead of a sale, the company could simply be looking for companies who are willing to acquire a stake to help it compete against Uber.

9/ SolarCity Corp: The majority of board will sit out of deal decision [573 messages in the last 24h]

Two more SolarCity board members who have ties with Tesla have decided to exclude themselves from making decision about Tesla’s offer. That means the majority of the company’s board will not participate in the decision making process. The company is forming a special independent committee to decide on the potential deal with Tesla.

10/ Lloyds Banking: Shares plunge because of Brexit [473 messages in the last 24h]

Lloyds shares have fallen 15.9% since the official announcement of Brexit, which leads the U.K. government to shelf plans to sell stakes in RBS and Lloyds. Aside from that, traders are considering the shares worth buying thanks to a turnaround achieved by management in recent years.

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