British Pound to FTSE Market Flip

Amid a tumultuous week of multiple convictions and guilty pleas among Trump associates, it’s nice to take a breather from a flurry of news and press conferences in the President’s ever closer circle of confidants to take in some news elsewhere.

Since the referendum vote on Brexit 2 years ago there have been few constants in British stock market activities. One has been the inverse relationship between the British pound and the FTSE 100 index. That has just changed. Yes, emerging market stocks and mutual funds have moved negative in recent months because of flight to lower risk investments. The tariff wars between the US and China have taken their toll. Further, among investments flight has been to invest in “safe haven” currencies, namely the US dollar. The 40-day moving average has turned positive, meaning a similar trend is growing in the sterling, which is not considered a safe haven currency. Not being a safe haven isn’t a negative; it just isn’t the norm. The weaker pound is good for earnings on British stocks and the overseas demand for UK-based products. Market analysts see the flip as a negative economic sign, especially since it briefly occurred once before this year, around the first quarter. Bloomberg

 

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