FTSE 100 Keeps Falling, Weighed by Pound and U.S. Political Jitters

U.K. shares dropped on Friday, extending their losses to the sixth consecutive trading days. The FTSE 100 index headed for its worst weekly performance in 10 months, dragged down by the pound’s rise and the bearish sentiment from losses in U.S. markets.

With only a few shares trading higher, the U.K.’s benchmark lost 1.28% so far to fall to as low as 6,703.91. Uncertainties over the outcome of the White House race have worried investors. The gap between Republican nominee Donald Trump and his Democratic rival Hillary Clinton, who is seen as more positive for financial markets, has been narrowing since last Friday, when the case related to Clinton’s use of private emails was reported to be reopened.

The slide of the FTSE 100 index was also due to a strengthening Pound which has gained momentum since a U.K high court ruled that a parliamentary vote must be held before the government trigger the two-year negotiation on the U.K.’s withdrawal from the European Union. Furthermore, the Bank of England on Thursday decided to leave its rate unchanged, stating that the central bank can even raise rate if inflation grows too fast and cause adverse effects on the economy.

Many blue-chip stocks that had been benefitting from the fall in the pound, now retreated as foreign earnings for multinational companies will be dampened when converted into sterling if the cable strengthens.

Among multinationals, Hikma Pharma led losses on the market as the company’s shares dropped 5.9%, Shire PLC also declined, shedding 3.07%. Other market’s movers including housebuilding companies, with Taylor Wimpey plc losing 3.53% and Persimmon plc dropping 3.93%.

Also on the downtrend, shares of The British Airways parent, International Consolidated Airlines Group SA, plunged 3.59%. IAG cut a key medium-term earnings measure and lowered growth expectations as it adjusts to the post-Brexit vote slide in sterling.


Fig: FTSE 100 technical chart

FTSE 100 index has fallen below the 23.6% retracement at 6743.55 and is heading downwards to test the support at 6650.00. The index is under downward pressure from two MAs which hanging above the price action. RSI has entered the oversold area, signalling a pull back soon to come.

Trade suggestion

Sell Stop at 6700.00, Stop loss at 6750.00, Take profit at 6650.00

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