Trading FX-sensitive stocks – Markets march on

If trading currencies directly isn’t for you, there are other options available to you to benefit from the future performance of the Pound in the form of stocks that are sensitive to the movements of FX markets.

It is estimated that 75% of UK 100 profits are denominated in foreign currencies; therefore, the UK currency’s current weakness against its peers has resulted in a handsome translational gain for many of its components.

Despite the initial shock to the stock market that Brexit caused, many UK 100 constituents have gone on to post fresh all-time highs alongside the index itself. As a result, UK stock markets have been flourishing; both the UK 100 and 250 have posted fresh all-time highs in the last couple of weeks.

As we have seen since the referendum, some shares have enjoyed more impressive performances than others, many on the back of the weakness of the pound. The top and bottom performers over the period are shown in the table below.

Source: AlphaTerminal, LSE, 21 Oct

Many of the top performing companies have a high proportion of foreign currency-denominated earnings. Should the BNP Paribas analyst prediction mentioned earlier ring true, and Cable recovers to $1.30, what might happen to the top stocks listed above? What about if it went to parity…?

Accendo FX Offering

The movement of the Pound, Euro and Dollar will greatly impact your life over the coming weeks and months as political and economic conundrums play out. As a result, choosing one (or more) of the actions mentioned above could, at the least, take a little of the edge off as the Pound hovers near its lows.

Whatever course of action you choose, we’re here to help you make the most of whatever trading opportunities present themselves. Our traders are always on hand to help you, so contact us now!