The regular monthly spread trading review from IG Index.
IG Index FTSE 100 Spread Betting - August 08
"First Positive Month for FTSE 100 Since April"
The stock-market recovery that started in mid-July continued in August but only really found some momentum towards the end of the month. It was something of a traditional August for the stock market: volumes were low due to the holiday season and trading was a bit choppy overall. This was a far cry from last August when the credit crunch first hit the headlines and sent stocks plunging.
As with all of the FTSE 100's recoveries over the past year, the question is how sustainable will this latest rally will prove to be? In August the UK index reached levels not seen for a couple of months and left some traders and investors eyeing the 5700-6000 zone as the next possible hurdle.
(IG Index price data: compiled 4 September 08)
IG Index Forex Spread Betting
"Sterling gets Pounded"
Coming into August the GBP/USD exchange rate was trading just below two dollars to the pound – an area it had spent most of this year skipping above and below. All this changed as August started, with the currency pair slipping to fresh lows for the year.
This prompted a fairly relentless slide that saw GBP/USD almost 10% lower as the month ended, putting the pound back to its lowest level in more than two years against the US dollar.
The US dollar has been stronger across the board recently but the weakness of sterling has been compounded by the ongoing gloomy outlook for the UK economy, coupled with the expectation that there could be an interest-rate cut before the end of 2008.
(IG Index price data: compiled 4 September 08)
IG Index Gold Spread Betting
"Gold hits fresh 2008 lows"
The strength of the US dollar also took its toll on the price of gold. Back in March we saw all-time highs for the yellow metal but since then it has not had the same sort of momentum.
In August the price broke below the $850 support level and eventually traded down to the $775 area before bouncing back. The strength of the US dollar played a part in this but gold has also been caught up in the recent weakness seen across many commodity markets. Oil, of course, has been the other high-profile casualty, dropping back towards the $100 per barrel mark.
Back in November last year, the $770 area did manage to underpin further weakness in the price of gold and this area is likely to be a key focus for traders in the light of any further weakness in September.
(IG Index price data: compiled 4 September 08)
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.
Article provided / approved by IG Index which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 114059.
'IG Index Review of August' edited by IG Index, updated 10-Sep-08
Index of UK financial market trading articles - the regular closing market comments from IG Index...see Index.
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Risk Warning:
Please note that spread betting and CFD trading carry a high level of risk to your capital. You can lose more than your initial deposit. These products 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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