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British Pound (GBP), FTSE 100 Latest: Rising Together as Brexit Row Begins

British Pound (GBP), FTSE 100 Latest: Rising Together as Brexit Row Begins

2020-02-12 09:10:00
Martin Essex, MSTA, Analyst
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GBP price, FTSE 100, Brexit news and analysis:

  • Generally, the British Pound and London stocks have an inverse correlation, meaning when one falls the other rises.
  • Now they are moving higher together on a more positive mood in the markets thanks to hopes the coronavirus outbreak has peaked.
  • However, the UK and the EU are taking strong, and opposing, positions on financial services ahead of detailed Brexit talks and that could yet damage sentiment towards UK assets in general and bank shares in particular.

GBP/USD and FTSE 100 advance together

Unusually, both GBP/USD and the FTSE 100 index of leading London-listed stocks are strengthening together. However, that may not last long as the EU and the UK both take hard lines on financial services once the Brexit “implementation period” concludes at the end of this year.

This inverse correlation between Sterling and the FTSE reflects the large number of internationally-focused companies in the index, such as banks and miners, that benefit from a weaker Pound. It therefore seems unlikely that both will continue to advance even though hopes that the coronavirus outbreak is close to peaking is currently lifting asset prices worldwide.

GBP/USD has been strengthening steadily this week and looks set to regain the 1.30 level last seen a week ago.

GBP/USD Price Chart, 30-Minute Timeframe (February 10-12, 2020)

Latest GBP/USD price chart.

Chart by IG (You can click on it for a larger image)

GBP/USD BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -10% -13% -12%
Weekly 13% -6% 0%
What does it mean for price action?
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At the same time, the FTSE 100 is also extending the gains made over the same period.

FTSE 100 Price Chart, 30-Minute Timeframe (February 10-12, 2020)

Latest FTSE 100 price chart.

Chart by IG (You can click on it for a larger image)

FTSE 100 BULLISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -19% 7% -8%
Weekly -2% 6% 2%
What does it mean for price action?
Get My Guide

Yet the UK and the EU are both taking hardline positions on financial services ahead of detailed talks on the future relationship between the two once the Brexit implementation period concludes at the end of 2020. UK Chancellor of the Exchequer Sajid Javid said Tuesday that the UK financial sector should be deemed “equivalent” to the EU’s. By contrast, the EU’s chief Brexit negotiator Michel Barnier said there would be “no general, global, permanent equivalence”.

Bank shares at risk

This political positioning is unsurprising ahead of detailed negotiations. However, GBP/USD and the FTSE 100 seem unlikely to continue to advance hand-in-hand – and it could be the stock index that cracks first given that bank shares are likely to be in the front line if the UK and the EU continue to fight over financial services post Brexit.

We look at Sterling regularly in the DailyFX Trading Global Markets Decoded podcasts that you can find here on Apple or wherever you go for your podcasts

--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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