Today’s Spotlight Market
There continues to be an inverse relationship between the FTSE 100 and the British Pound. The FTSE 100 has been hitting record highs while the Pound is trading at 30 year lows. The weaker Pound benefits exporters and hurts importers. The companies included in the FTSE 100 are mainly international firms which derive about 70% of the revenues outside of the United Kingdom.
Fundamentals
Currency traders experienced a shock last week as a two minute flash crash plunged the Pound down 6% to 1.1841. The Pound quickly recovered but recent trading has failed to stem the relentless downward trend. The Pound is now down 17% for 2016 and is the worst performing major currency this year. The Times reported today, from leaked UK Treasury papers, that the ?hard Brexit? option, in which the UK leaves the EU and does not retain access to the European Single Market, could causes losses of up to 66 billion pounds a year in tax revenue. In addition, London Mayor Sadiq Khan is expected to strongly denounce ?hard Brexit? today in a speech to the Confederation of British Industry. As the debate continues over the path the United Kingdom will take in leaving the European Union, the Pound will likely continue to be volatile. .
Technical Notes? -? View Today’s Chart
Turning to the 3 month continuation chart, we see the Pound making a series of lower highs and lower lows, a bearish trend. The 20 day moving average is sloped sharply downward, yet another bearish sign. The Pound has broken previous support at 1.25 and the next support level appears to be at the 1985 low of 1.05. 14 day Relative Strength Index is in oversold range at 21.18
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