Pound goes into tailspin, but the FTSE climbs
This morning saw the pound fall to a 31-year low against the US dollar as markets reacted to speeches from the Conservative Party conference.
£1 now buys $1.27 dollars compared to $1.29 over three decades a go in June 1985. The lowest it’s ever been against the dollar is $1.05, in March 1985.
The pound was also down this morning against the euro, falling by 0.3% compared to yesterday, to €1.14.
The main drivers for the falls appear to be Chancellor Phillip Hammond’s statement that the UK economy would be a “rollercoaster ride” in the coming years, and Prime Minister Theresa May’s speech where she announced that Article 50, the clause that will set Brexit rolling, would be activated by the end of March 2017.
The currency markets appear to be unsatisfied with the lack of real detail on Brexit, which it was hoped the conference would provide. The news that the single market won’t be the focus of Brexit negotiations has just added fuel to the fire and turned the pound into something people want to sell, quickly.
- See how events alter the worth of currency and what this means for you with our guide to currency exchange.
The flipside of today’s news is that the FTSE 100 has pushed past 7,000 (currently it’s at 7,068) for the first time since May 2015.
Shares have been aided by the pound sell-off, as many companies listed on the UK’s premier index earn profits abroad, and therefore make more money when buying pounds with these earnings. Its highest-ever intra-day level is 7122.74, on 27 April 2015.
The FTSE 250 meanwhile, which consists of the 101 to 350 biggest UK-listed companies, has hit a new record high this morning of 18,409 points. This is down to the same reasons as those driving its bigger brother - its six biggest risers so far this year are all based overseas.
Tom Stevenson, director of personal investing for Fidelity International, says: “This is obviously good news for UK investors and no-one would complain about the market finally moving decisively on from its 1999 dot.com bubble peak.
“But it should be remembered that the main reason shares are rising today is the remarkable slide in the pound to its lowest level since 1985. It’s good for UK exporters and overseas earners but for foreign stock market investors it takes the edge off the latest gains.”
The term is interchangeable with stock exchange, and is a market that deals in securities where market forces determine the price of securities traded. Stockmarket can refer to a specific exchange in a specific country (such as the London Stock Exchange) or the combined global stockmarkets as a single entity. The first stockmarket was established in Amsterdam in 1602 and the first British stock exchange was founded in 1698.
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.