Thu, 17th May 2018
In the face f mounting pressure against it, the FTSE 100 has proven to be surprisingly resilient, climbing from 6,888.69 a month ago, to 7,425 at the end of the week. The trajectory of the UK’s leading index is quite bullish, as shown by the strength of it in terms of short-term growth, however the year to date has not been as impressive as it could have been.
The FTSE 100’s performance is inversely linked to that of the pound. When there is strength in the pound, the index moves in the opposite direction. Weakness in the pound - something that has been common with the Brexit fears - helps the index to make gains. The market is moving in a positive direction in part because of the instability of the Brexit negotiations.
Investors are usure what the future will hold for the UK economy. The GBP fell to a 31 year low, and the FTSE 100 has broken the critical 7,000 mark and continues to make gains. There is talk of a rate hike coming this year, however, and that would attract greater investment to the UK, which could strengthen the pound. If the Brexit negotiations start to make progress, that would also mean some new strength for the sterling - and while that’s good for the overall economy, it raises questions for the companies in the index that take their earnings in foreign currency - companies which make up a large portion of the value of the FTSE 100 today.