The FTSE 100 had a rough day in the market today, and for good reason. The benchmark index of the UK is starting to feel the pain of the Brexit without the market support provided by booming US stocks. Today, we’ll talk about why the FTSE 100 is headed downward as well as what binary options traders should be watching for ahead.
Why The FTSE 100 Is Down
The FTSE 100 had a decent start to the year, even in light of the Brexit news. While there are many factors that the gains in the index can be attributed to, one factor remains supreme. Strength in the US market and currency have helped to support strength in the FTSE 100. However, things seem to be changing and in a big way.
You see over the past several trading sessions, the USD, US market, and FTSE 100 have all been starting to fall. We’ll get into how the US market and USD are correlated to the FTSE 100 in a bit, but for now, let’s talk about the two big factors that are causing US weakness, leading to weakness in the UK…
- Trump Rally Just About Dies – A big part of this is what seems to be the end of the Trump Rally. You see, throughout his campaign for the office of President of the United States, Donald Trump made various promises pointing to an improving economy. While his early moves did show benefit to the economy, what he does next and the effect of these moves is still largely uncertain. As a result, the uncertainty is leading to a wait and see approach by investors, which is never good for the market. Many argue that this is the signal of the death of the Trump Rally.
- USD Takes A Dive – Another thing that we’ve seen as of late is the fact that the USD has been consistently falling for several trading sessions. The big cause for this has to do with the Federal Reserve. At the last Federal Reserve meeting, the Fed increased its interest rate 0.25%. However, because investors expected a larger increase, and the Fed had dovish comments to offer, the increased rate actually led to a declining currency. Once again, the wait and see mood is killing the rally that we’ve seen in the currency.
What Does All Of This Have To Do With The FTSE 100
Throughout the evolution of the Brexit story, President Donald Trump has shown his support for the UK’s decision. Essentially, the strength offered through this support led to bullish mindsets in UK investors, which closely tied the British market to the US market. As the US market falls, it is putting pressure on the UK market, causing it to do the same.
Another big key here is the USD. You see, the FTSE 100 is a very commodity-heavy index. At the end of the day, this means that the FTSE 100 lists several components that make their money in commodities. Because commodities are largely priced using the USD, these companies do most of their business with the USD currency. Therefore, when the USD rises, commodity-centric businesses in Britain automatically see an increase in value thanks to currency exchange rates. On the other hand, when the USD falls, as it has been as of late, the British companies that deal in commodities have to deal with getting less GBP for every USD they make. Because the FTSE 100 is commodity heavy, the reduction in these company values leads to declines in the index as a whole.
What Binary Options Traders Should Be Watching For Ahead
Moving forward, the FTSE 100 is likely to present several incredible opportunities for binary options traders. However, in order to turn these opportunities into a profit, you’re going to need to keep a close eye on the news. In particular, watch all news associated with the Brexit, strength or lack thereof in the US market, strength or lack thereof in the USD, moves made by President Trump, and Federal Reserve comments and moves. Any updates to any of these stories will likely lead to opportunity in the FTSE 100.
What Do You Think?
Where do you think the FTSE 100 is headed moving forward? Join the discussion in the comments below!