The regular monthly spread trading review from IG Index.
Spread Betting on the GBP USD Futures Market
"Pound continues to rise against USD"
Like the stock market, the pound continued to recover in May, with GBP/USD rising by more than 1000 points through the month. This trend continues the sharp turnaround we have seen after the depths were plumbed back in January when the pound slipped to its lowest level against the US dollar in more than 20 years.
Recent months have seen a change in sentiment in foreign exchange markets. Initially, there was a feeling that pessimism towards the UK economy was overdone at the start of 2009, helping make the pound more attractive to investors than in the past. In recent weeks, the US dollar came under pressure against many world currencies, keeping the pound's positive momentum going.
The net result is that GBP/USD was back to its best level in seven months by the end of May, with many now eyeing the late October highs of around 1.6700 as the next big obstacle. Whether or not this will be broken in June remains to be seen, but based on what the market has done over the past few months, forex could well be an interesting one to watch out for in the weeks ahead.
(IG Index price data: compiled 3 June 2009)
Oil Futures
"Oil sneaks back towards $70 per barrel"
With the focus back on the stock market bounce in recent months, other types of assets have struggled to make front page news. Crude oil, however, was one market that recorded impressive price gains recently, with the July contract trading above $66 per barrel last month.
Last year saw the price of oil continually making headlines: the first half of the year was all about oil hitting record highs, with prices touching almost $150 a barrel in July – and then the corresponding bust saw prices slip below $34 a barrel by January this year.
The price of oil has almost doubled since then, with oil now back to where it was at the beginning of November. One of the main drivers appears to be the feeling amongst some that the economic slowdown is past its worst and that there will be increased demand for raw materials and energy as economies start to expand again.
Whether or not the worst is over remains to be seen, but the strength of oil has continued into June. Some are expecting the early November highs of around $72 a barrel to at least act as a short-term barrier. For now, though, sentiment towards oil remains positive.
(IG Index price data: compiled 7 May 2009)
Spread Betting on the FTSE 100 Index
"FTSE 100 returns to January levels"
The recovery for the FTSE 100 continued strongly into May after slipping back below the 3500 level in March. By the end of the first week of May, the blue-chip index had bounced back by more than a thousand points from its latest low, managing to reach levels not seen in nearly four months.
As seen in the past couple of months, strong sentiment towards the banking sector played its part, with investors taking the view that the worst may be over for many of these financial institutions, and that the slide in their share prices was possibly 'overdone'. In other sectors, miners remained the flavour of the month in May, helping keep the positive momentum going on the FTSE.
As May went on, this strong momentum started to wane, however, and the index became stuck in a sideways range – something that has persisted into June so far. The last few weeks have seen the 4500 area successfully cap any short-term rallies and this is going to be the first point of focus for traders in June; they will be keen to see whether this ceiling can be cracked open for further gains.
(IG Index price data: compiled 3 June 2009)
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 May 2009' edited by IG Index, updated 11-Jun-09
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