Currently owe China around $100,000 dollars from import so watching the USD very closely over the past week or so. It is so closely related to the large index funds and the stock market as a whole. Can anyone shine a light as to why? If the stock market goes up - so does the strength of the £ to the dollar. If the stock markets goes down - so does GBP/USD. I can’t figure out why.
It is hard to decipher correlation between currency markets and stock markets. There are some general rules such as when the GBP weakens against the USD the FTSE 100 tends to rise. However, in general, the two markets can respond to the same events in very different ways.
In this environment things are moving because of confidence. Any currency (bar the USD) will tend to rise along with stock markets at the moment on any slight good news. However, these are unusual times.
Usually the exchange rate and stock market are (weakly) inversely correlated - this especially true of the FTSE 100 and the £ because many FTSE companies earn overseas so if the pound falls the number of pounds earned abroad will go up. At the moment investors are looking for safe haven currencies and the dollar is the big safe haven - Swiss Franc can be too. The pound has been tanking because the UK is not seen as a stable economy at the moment because of the macroeconomic uncertainty of Brexit, still lurking in the background.