Is A Higher Fed Rate Actually A Good Thing For The FTSE 100?

Friday proved to be a rough day for the FTSE 100, and the declines are understandable. Considering the fragile state of the UK economy with regard to the Brexit, any changes in larger economies can lead to big concerns for the UK, and therefore, the FTSE 100. On Friday, the US jobs report for the month of November was released, with positive results that suggested a rate hike is on the way. At the end of the day, this spooked the market and the FTSE 100 felt the pain. However, is a higher rate actually a good thing? Today, we’ll talk about the jobs report that was released on Friday and why it suggests a rate hike is coming, why this may actually be a good thing for the FTSE 100, and what binary options traders should be watching ahead.

The US Jobs Report For November Supports A December Rate Hike

The Federal Reserve has been a hot topic in the world of finance for some time now and for good reason. The rate has been at incredible lows. In fact, in December of last year, the Fed increased the rate slightly from record lows. At the same time, they said that the rate would be going up between 2 and 4 more times by the end of 2016.

Unfortunately, however, economic conditions throughout the year have not supported a rate hike. Nonetheless, for the past several months, conditions have been improving, and with the jobs report released on Friday being relatively positive, the Fed may have what they need to raise it’s rate. After all, with 178,000 new jobs added to the United States economy, unemployment numbers are now the lowest we’ve seen since August of 2007.

Why This Could Be A Great Thing For The FTSE 100

With the news of the strong jobs report, the FTSE 100 took a dive in the beginning of trading on Friday. Concerns with regard to the effects of a higher value USD following an interest rate hike hit the index relatively hard. However, at the end of the day, a higher interest rate could be a great thing for the FTSE. Here’s why…

The FTSE 100 is largely a commodity-heavy index. This means that many of the components listed on the index make their money in the commodities market. This could be mining and selling basic materials, it could have to do with supplying equipment to mines and others in the commodities sector, really, it can be many things, but ultimately a large number of components listed make their money in commodities.

Commodities are largely priced using the USD. This means that when the USD moves up in value, the companies that deal in commodities will essentially get a raise when the money they make is converted into their own national currency, the GBP. Ultimately, this could cause the FTSE 100 to climb.

What Binary Options Traders Should Be Watching Ahead

Moving forward, the FTSE 100 is likely to present several opportunities to binary options traders. However, in order to take advantage of these opportunities, you’ll want to keep a close eye on a few key factors. First and foremost, pay attention to what’s happening with the US economy and the Federal Reserve as changes in the USD can lead to movement in the FTSE. Also, the Brexit is far from over, and that story continues to heat up. So, watch this story closely as well. Finally, Donald Trump’s changes to trade agreements could hit home in a big way in the UK. So, pay attention to the news as he transitions into the office early next year.