The regular monthly spread trading review from IG Index.
FTSE Spread Trading News
Volatility Returns to the FTSE
The first half of April saw steady, if somewhat unspectacular, progress made by the FTSE 100 index as it extended the recovery that started in March 2009.
Buoyed by a strong start to the earnings season in the USA, the index pushed higher and hit its best levels since June 2009, trading through the 5800 mark.
It looked like most UK investors were not too troubled by the prospect of a hung parliament with many of the large UK blue chips deriving a significant portion of gains from overseas.
Some of the shock numbers coming from the opinion polls barely moved the market; it was left to the debt situation in Greece to once again really send shivers through share prices.
The downgrading of Greek bonds to ‘junk’ status had investors heading for the exits at the end of April, but so far this panic has proved to be short-lived and the FTSE has clawed back some losses.
The debt problems of European countries still have the potential to rock markets but for now the longer-tem recovery remains in place.
European Forex Spread Betting News
Greece is the Word Weighing on the Euro
The debt situation in Greece was a focus for stock markets at the end of April, but it was never far away from forex traders’ thoughts during the month either.
In the second week of April a bail-out plan was announced over the weekend and this saw EUR/USD ‘gap’ open on the Sunday night, starting off around 100 points higher than where it had closed on the Friday.
However, due to a lack of detail about the steps for the bailout, markets became edgy once more and the Euro spent the rest of the week eating into these windfall gains.
The hammer blow for the Euro was the announcement towards the end of the month that Greek bonds were being downgraded, followed a couple of days later by a downgrade, though not as severe, for Spanish bonds.
All this meant that EUR/USD slipped to its worst levels for a year. The market will be hoping that there is some sort of definite conclusion to the Greek rescue during May, and of course that it is not just tip of the iceberg and other countries end up in financial difficulty.
Either way, EUR/USD is expected to remain volatile in the short-term.
Sterling Spread Trading Update
Hung Parliament Risk Hinders Sterling
Here in the UK there is another small matter occupying investors’ minds: the General Election.
This has resulted in a somewhat turbulent time for the Pound in recent weeks, particularly for GBP/USD, with opinion polls indicating that a hung parliament looks increasingly likely.
During the first half of April, GBP/USD did at least continue to claw back some of the ground lost in earlier weeks, briefly trading back up through $1.5500 at one point before dropping back. For many people this currency pair’s trend remains down when looking at the past six months.
It is difficult to know whether forex markets are overreacting to the potential outcome of the UK election, but we will find out soon enough.
Either way, it is unlikely to be a quiet time for the Pound in the weeks ahead, with traders closely scrutinising any government plans to keep the economic recovery on track.
The above comments do not constitute investment advice and neither IG Index nor Clean Financial accept any responsibility for any use that may be made of them.
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Risk Warning: Financial Spread Trading and CFDs carry a high level of risk to your capital. You may lose more than your initial investment. They may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
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'IG Index Review of April 2010' edited by IG Index, updated 13-May-10
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