The FTSE 100 has again been constrained by a strengthening in the value of the pound. It is the fifth day in a row the pound has risen against the dollar, following the Bank of England’s announcement that it will not introduce negative interest rates.
“While the currency got off to a tepid start, it doesn’t take a lot these days for the pound to hit fresh multi-year highs. A 0.2% rise against the dollar, for example, has pushed cable above $1.3835 for the first time since the very start of May 2018,” said Connor Campbell, financial analyst at Spreadex.
The news does not bode well for the FTSE 100 companies selling goods abroad. Products and services will become more expensive to overseas buyers and the profits made outside of the UK are devalued when converted back into sterling.
This is reflected by the continued flatlining of the FTSE 100 during Wednesday’s pre-lunchtime trading.
FTSE 100 movers
Smurfit Kappa (3.28%), Glencore (2.91%) and Anglo American (2.63%) have made the most ground so far today at the top of the FTSE 100.
Ocado (-3%), along with two home builders, Barratt Homes (-2.5%, and Taylor Wimpey (-1.87) sit at the bottom of the index at mid-morning trading.
Smurfit Kappa raised its final dividend on Wednesday as the company revealed it made a pre-tax profit during 2020.
A provider of sustainable packaging for goods, Smurfit Kappa has benefited from the increase in online shopping during the lockdowns.
The FTSE 250 asset management firm saw its pre-tax profits for the second half of 2020 climb by 14% to £150.6m.
The result was driven by a strong “investment performance”, with 97% of Ashmore Group’s assets under management (AuM) outperforming benchmark indices over the six month period.