The regular monthly spread trading review from IG Index.
FTSE Spread Betting Update
FTSE Loses Momentum
After a late rally in December, investors seemed to come back to the markets still in a positive frame of mind.
Within the first couple of weeks of 2010 the FTSE 100 index pushed out to its best levels for 16 months, moving out towards the 5600 mark.
After this, what started off looking like a mild correction for share prices ended up being something of a rout.
Towards the end of the month the FTSE had slipped back to the levels last seen towards the end of November.
Weighing heavily on stock markets was President Obama’s plans to rein in the speculative trading activity of US banks, in order to try and avoid the risks of another financial crisis.
Financial markets are still awaiting clarification on what this will entail but towards the end of January there seemed to be the first signs of stability returning to share prices.
Some investors are happy to view the slide in January as just a correction within the overall 10-month recovery. Markets will be closely watched in February to see if they can stage another assault on the highs set at the beginning of this year.
(IG Index price data: compiled 2 February 2010)
Forex Spreads News
Pound Feels the Pressure
The last seven months have seen significant volatility for the GBP/USD, but with the net result of little change.
January has continued this pattern and by the middle of the month Cable was heading towards the $1.6500 area. However, by the end it had given up these gains and more to slip back more than 500 points.
January was of course the month the UK came out of recession, but this was with more of a whimper than a bang.
The economy grew by 0.1% in the final quarter of 2009, much less than most economists were expecting, and the immediate casualty of this disappointing figure was GBP/USD.
After choppy trading in the days following, the currency pair slid even further.
The big level that many are watching is $1.5700. This has proved to be the low over the last 8 months and some currency traders still see this as having the potential to prop up longer term weakness for the Pound.
(IG Index price data: compiled 2 February 2010)
Gold Spread Betting Report
Gold Marks Time
After impressive gains in 2010, gold started off the New Year in a muted fashion, trading in a tight range relative to what we have been used to lately and ending January roughly where it started.
After surging as high as $1225 per ounce in early December, it is clear that the price of gold has lost a considerable amount of momentum in recent months.
There are a couple of fundamental reasons behind this. There has been a resurgence for the US Dollar against many world currencies and of course this will negatively impact the gold price.
In addition, investors are not sure how much of a problem inflation is going to be in the medium term, so again this has reduced the attractiveness of using gold as a hedge against it.
Nevertheless, for many people the 15-month recovery for gold remains firmly up. Over recent months any weakness back towards $1,075 has served to flush the buyers out and this will continue to be a key level into February.
(IG Index price data: compiled 2 February 2010)
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 January 2010' edited by IG Index, updated 10-Feb-10
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