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With the FTSE trading a tight range, what are spread bettors doing?

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April 7, 2016 By: , No Comments

Financial Spread Bettors Eye Markets with Cautious Optimism

On Wednesday, 6 April 2016, the FTSE 100 index was trading at 6,126.29, up 0.58%, or 35.06 points on the day. There are multiple destabilizing elements taking place in the global economy, notably crude oil price fluctuations, the Panama situation, the referendum on a Brexit on June 23, 2016, and of course Fed rate decisions in April and beyond. UK financial spread bettors are having to digest all of this information in real time and make informed, accurate and prognostic determinations. Of particular interest to UK spread bettors is the relatively flat performance of the FTSE 100 index. It has remained in an exceptionally tight range between 6,100 points and 6,200 points since March 2016. This is in stark contrast to the Dow Jones Industrial Average, the S&P 500 and the NASDAQ composite index which have shown high levels of volatility and growth in recent times.

 

What is Causing the FTSE 100 Index to Rally?

It is interesting to point out that the FTSE 100 index has had multiple opportunities to rally or fall through its current support levels – yet it has done neither. The tight-trading range of the UK’s leading index has given investors and financial spread bettors pause, since it is difficult to gauge which direction the trading activities are going to move. The performance of the FTSE 100 index has been range bound since March, although there have been occasional movements to the upside or downside of the 6,100 – 6,200 levels. Clients of major financial spread betting companies have tended towards the buy mark with the 6,200 level in sight, while there is also substantial negative sentiment playing into overall trading activity with traders going short on the FTSE 100 index at the same time.

 

Major factors driving the FTSE 100 index full spread betting activity

The rather directionless nature of the FTSE 100 index has hampered volume trading in spread betting circles, but the big issue remains the Brexit on June 23. While the FTSE 100 index reacts strongly to ups and downs in the strength of the GBP, it is nowhere near as robust or responsive as the Dow Jones Industrial Average and the S&P 500 index to up and down movements of the USD. UK markets naturally focus heavily on the actions of the ECB and the Bank of England, but so far those monetary authorities are having a muted effect on the tight trading range of the index. There is very little for the FTSE 100 index to gain positive momentum from at the moment, and the only pressure is the strength of the GBP or anxiety related to the Brexit. We are however seeing a major impact on the FTSE 100 index is a result of crude oil, copper, iron ore and steel. The seesaw nature of crude oil prices is also less impressive a factor for the performance of the FTSE 100 index and spread bettors are now well aware of that too.

 

Financial spread bettors short GBP/USD pair on the back of rate hikes and US economic data

Recall that recently, the US nonfarm payrolls jobs reports helped to strengthen the USD somewhat, and comments made by the Fed chair, Janet Yellen will invariably impact on spread betting activity too. For the most part, Janet Yellen has adopted a dovish approach while many presidents at the FOMC and outside of it are inclined towards a hawkish approach – rate hikes in the short term. When it comes to the GBP/USD currency pair, spread betting has largely been leaning towards sell options as the consensus opinion among analysts is that the USD will strengthen in short order.

 

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