Inside the Currency Market: Mechanics, Valuation, and Strategies

FTSE and British Pound

The majority of the world reports and focuses on the FTSE 100 Index that trades on the London Stock Exchange. This index comprises the best-capitalized companies that trade on the London Stock Exchange. But it's the FTSE 250 Index that serves as the better barometer and measure of health of the economic situation in England and direction of the British pound because those 250 companies are more U.K. represented. Point movements will always be more broad in the FTSE 250 than the FTSE 100.

See Exhibit 8.4, a five-year chart of FTSE 100. The Financial Times of London always credits this index as its benchmark and this view can be accepted.

EXHIBIT 8.4 FTSE 100 Five-Year Chart

Further, the FTSE 250 allows for a better view ...