UK Markets: FTSE 100 Diverges With British Pound
Stock-Markets / Financial Markets 2017 Dec 30, 2017 - 02:29 PM GMTBy: Submissions
UK markets continue to garner more of the attention in the financial media as we are now seeing a strong divergence between the activity of the FTSE 100 stock benchmark and the underlying value of the British Pound (GBP). This is significant because it ignores many of the market trends that have been place since the early parts of 2017, and so there are real concerns here for traders that might be positioned on the wrong sides of these markets.
Perhaps most striking here is the meteoric rise that is now being seen in the FTSE 100. We are quickly approaching the 7700 as of writing, and these moves are being propelled largely by the changing interest rate expectations that are now in place at the Bank of England (BoE). At this stage, it is clear that the central bank is most concerned with keep growth rates stable and this could come at the expense of rising consumer inflation if certain economic reports become problematic.
On the trading front, BoE policy will likely to continue to rule the day as the latest impulse moves are exceedingly bullish. Previously, we had been watching a strong double top resistance form in the 7580 area but the market has been decisive in removing that as a barrier. At the moment, we are expecting a re-test of the breakout point in the FTSE 100 and this should provide a better area for buying opportunities into next year.
Further validating this expected stance is the oversold indicator reading in the Commodity Channel Index, which is now looking as though as retracement is in store. If this does occur, it could put markets back toward our buy zone and create some interesting options situations for the index.
Providing a stark contrast here is the GBP/USD which is continuing with its massive declines. We are now within striking distance of the lows that were set last November and so this will be critical for anyone looking to take major positions in the currency markets. The latest data reports detailing forex trading uk now suggest that the market has turned decidedly bearish in terms of the options positioning numbers that are currently available.
Looking at the broader market trajectories we can see that these are all interesting developments that could lead to significant trading opportunities if these trends continue. In other words, if we continue to see a falling GBP there is an increased chance for sustained rallies in the FTSE 100 and this should continue well into next year.
By New Forex Trends
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