The FTSE100 Index, which tracks 100 different currencies against a common base of the United Kingdom, has dropped in value over the past year, and many analysts are warning that this drop could continue. In the last two months alone, the FTSE100 dropped by 10 percent. However, amidst these concerns over inflation and global economic instability, the FTSE100 has shown signs of strength, with the index up over three percent over the last few weeks.
This sudden rise comes at a time when the UK is worrying about the threat of recession. Inflation has continued to rise, and many economists have blamed the weak pound, high joblessness, rising food prices, and slowing consumer spending on the tighter fiscal policy measures being implemented in the UK. These tighter fiscal policies, however, have only resulted in higher inflation, and higher real estate costs. Concerns over an impending recession have led the Bank of England to keep interest rates on hold, which have further increased the pressures on consumers already facing rising housing costs and high mortgage payments.
Although it seems that things are pointing to a possible recession, the FTSE100 is far from proving the gloomy effects of analysts’ predictions. While experts have predicted that house prices will begin to fall in the next few months, the FTSE100 has remained relatively strong, even in the face of recent falls. In fact, over the last few weeks, the index has picked up, and prices have risen from their lowest levels in several years. Furthermore, experts have pointed out that the strength of the FTSE100 is unlikely to affect other trading currencies. Other than the US dollar, which has been the victims of currency market volatility over recent months, no other major currency pair has registered any significant falls.
The recent weakness in the British pound is also likely to have had little effect on the FTSE100, as the economy has continued to remain resilient despite the global credit crunch. This means that consumers across the UK are able to continue to enjoy continuous increases in their purchasing power. The FTSE100 index has picked up in the past few weeks and as a result of this has increased its costs. However, the increasing cost of living is likely to have little effect on the currency prices of the top companies. In fact, many leading UK companies continue to enjoy high profits, despite the current economic situation.
In the past few years, it was commonly thought that the FTSE100 would suffer a downfall due to the global credit crunch. However, the index has remained largely on track, with most of its gains coming on the back of higher oil prices and higher retail prices. One of the main contributors to the recent economic slowdown in the UK was lower consumer spending, which resulted in higher inflation. If consumers continue to spend more money despite increases in prices, then the overall inflationary pressure will be greatly reduced. Given the relatively benign economic situation, there is no clear sign that consumers will begin to pay more for their financial products, which bodes well for the FTSE100.
Overall, there are a number of factors which could affect the FTSE100 during the course of this year. While all of these factors have been confirmed as being valid indicators of a possible change in the market, they will only be confirmed after the final index figures are released next month. This means that it is probably a good idea for traders to buy at the start of the year, as the current oil price increase is unlikely to continue into the final month of the year. On the other hand, there are signs that the index could fall over the coming months. If this occurs, the price of oil should start to decrease, which should benefit those companies trading on the FTSE100 index.
