GBP price, FTSE 100 news and analysis:
- GBP/USD is modestly firmer in early European trading as Chinese efforts to boost its economy to counter the impact of the coronavirus help steady nerves.
- Moreover, the FTSE 100 is rallying even though a possible further Sterling rally would harm the prospects of the many internationally-focused companies in the index.
GBP/USD, FTSE 100 sentiment could improve further
With no new Brexit news to focus on, GBP/USD is steadying and could rise further near-term as the People’s Bank of China continues to inject large sums of money into the Chinese financial system to help cushion any economic weakness caused by the coronavirus outbreak.
While Sterling is not a “risk on” currency to the same extent as the Australian Dollar, it too could benefit further on reports that the PBOC could lower interest rates and cut banks’ reserve ratio requirements in coming weeks should its current measures prove insufficient.
GBP/USD Price Chart, 30-Minute Timeframe (January 31 – February 5, 2020)
Chart by IG (You can click on it for a larger image)
| Change in | Longs | Shorts | OI |
| Daily | 11% | 3% | 8% |
| Weekly | 11% | -11% | 3% |
Moreover, the traditional inverse correlation between GBP and the FTSE 100 index of leading London-listed stocks has broken down for now. Generally, a rising Pound damages the prospects of the many internationally-focused companies, such as banks and miners, that are included in the index.
For now, though, the improvement in market sentiment is lifting the FTSE 100 too and, like Sterling, its near-term prospects have brightened on hopes that China’s monetary measures will help offset any damage to the global economy caused by the virus.
FTSE 100 Price Chart, 30-Minute Timeframe (January 31 – February 5, 2020)
Chart by IG (You can click on it for a larger image)
Recommended by Martin Essex, MSTA
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— Written by Martin Essex, Analyst and Editor
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