Bright start to the week for UK stocks

11 December 2017

This content has been created by X-Trade Brokers Dom Maklerski S.A.

The FTSE 100 has begun the week in a bullish mood with a rise of more than 40 points seeing the index move back above the 7400 level. The pound has fallen back a little and currently trades below the 1.34 handle against the US dollar and not far from last week’s lows.

 

Economic data back in Focus for GBP

Last week’s trade in the Pound was dominated by Brexit related headlines as the UK eventually managed to strike a divorce deal and allow future discussions to centre on trade. The week ahead will now likely see economics rather than politics back in the driving seat as far as sterling is concerned, with the latest CPI, UK employment figures and retail sales data due out before the Bank of England (BoE) rate decision at Thursday lunchtime.

 

Potential for a hawkish surprise

Last time out the BoE hiked the base rate for the first time in a decade, but there is little expectation for further moves this week. The market reaction to the hike was fairly subdued as it had been long telegraphed from MPC members, but given the latest Brexit breakthrough and the market not expecting another hike until the final quarter of next year there is some scope for a hawkish surprise. A solid batch of economic data this week, with tomorrow’s CPI reading of particular interest, could provide the bank with an opportunity to shift market expectations towards a faster pace of tightening and provide further support to the pound going forward.

 

Bitcoin futures does little for price discovery    

The launch late last night of CBOE Bitcoin futures has seen a strong move higher in the price, but a large divergence in price from several of the largest physical exchanges highlights the large levels of inefficiency still present. Shortly after the contract went live the CBOE website crashed, possibly due to a surge in traffic, but this wasn’t replicated by a surge in trade, with just 500 lots changing hands in the first hour. Proponents of the cryptocurrency argue that being listed on well respected exchanges will provide another layer of legitimacy to the market but the low volumes and sharp moves, which saw two trading halts occur after 10% and 20% gains on the day, have failed to dampen the volatility.

 

CBOE futures trade at large premium to cash

Furthermore, a wide divergence between the futures price and the cash has been created with a large contango apparent in the futures curve. This saw a premium of more than $2000 in the January contract to the spot at one point overnight. This leads to more questions than answers regarding the true value of Bitcoin, and provides a potentially attractive arbitrage opportunity from shorting the futures and longing the cash. Before traders rush in to try and profit from this huge divergence it should be noted that the premium may well simply be seen to reflect the greater trust placed in the CBOE marketplace compared to other digital Bitcoin exchanges which have been prone to several outages in the past week alone.   

 

Disclaimer

 

This article is provided for general information purposes only. Any opinions, analyses, prices or other content is provided for educational purposes and does not constitute investment advice or a recommendation. Any research has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Any information provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.

 

Past performance is not necessarily indicative of future results, and any person acting on this information does so entirely at their own risk, we do not accept liability for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.

 

When XTB provides trading analysis and/or research, the author of this article may have an interest in the instruments mentioned. XTB has policies in place to identify and manage any conflicts of interest that may arise in the production of research and the provision of trading analysis.

 

 

This service is provided by X-Trade Brokers Dom Maklerski S.A. (X-Trade Brokers Brokerage House joint-stock company), with its registered office in Warsaw, at Ogrodowa 58, 00-876 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. X-Trade Brokers Dom Maklerski S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

Tags:
  • gbp
  • UK100
  • bitcoin
Back

Trading CFDs on a leveraged basis involves significant risk of loss to your capital. They may not be suitable for everyone, so please ensure you fully understand all of the risks.

Trading CFDs on a leveraged basis involves significant risk of loss to your capital. Please ensure you fully understand all of the risks.

Trading CFDs involves significant risk of loss to your capital