The FTSE 100 has been a very interesting index to follow as of late, and for good reason. With US Presidential elections happening, the index is met with uncertainty. Today, we'll talk about why US elections play a role in the movement of the FTSE 100, what we're seeing from the elections, and what binary options traders should be watching when trading the FTSE 100 ahead.
Why The US Presidential Election Plays A Huge Role In The FTSE 100
At first glance, it may seem as though the benchmark index of the UK, the FTSE 100, and the US presidential elections have very little in common. However, that couldn't be further from the truth. In fact, the elections play a large role in movement in the index. Here's why…
The FTSE 100 is largely considered to be a commodity heavy index. This means that by market weight, there is a large percentage of components listed on the index that get their value from commodities they produce, refine, or sell.
Most commodities are priced using the USD. Therefore, when the value of the USD heads up, the profit realized for these companies in GBP currency rates climbs. Adversely, when the USD heads downward, these companies see declines in profits.
The presidential elections will dictate who will be the new leader of the United States for the next 4 years. As a result, the election is going to cause movement in economic conditions and currency rates. Down the line, we see movement in the commodity based components in the FTSE 100, leading to movement in the index as a whole.
How Elections Have Affected The FTSE 100 Recently
If you look at the FTSE 100 over the past week and a half or so, things aren't looking good. The index has been trading in the red on a slow, yet steady downward crawl. The reason for the recent declines is actually pretty clear. About a week and a half ago, FBI director, James Comey, announced that he was looking further into the Hillary Clinton email scandal. This makes Clinton the first presidential candidate that's in the middle of a Federal Investigation. This leads to quite a bit of uncertainty, which isn't good for the economy, the USD, nor the FTSE 100.
On top of that, as a result of the email issue, Trump is starting to do very well in the polls. So, there's even more uncertainty has been added to the issue. Many have large concerns with regard to how the economy would do under a Trump presidency, and considering his relatively weak economic plan, they're right to have these concerns. As a result, US markets, the USD, and the FTSE 100 have seen more struggles.
What Binary Options Traders Should Be Watching Ahead
When trading the FTSE 100 ahead, there are a couple of stories you should keep a close eye on. First and foremost, pay attention to the US presidential elections. These elections have the ability to sway the market in a big way in the short and mid term. However, it seems as though many have forgotten about the Brexit, which in many ways could lead to positive movement from the FTSE 100. Between the two stories, we should see quite a bit of volatility, the direction of the movement will largely depend on which story is in the limelight at the moment.
What Do You Think?
Where do you think the FTSE 100 is headed moving forward and why? Join the discussion in the comments below!
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