One of the most commonly asked questions is the following: How can I make my bankroll stretch further without working harder? It’s a challenge… but it’s entirely possible. Many folks are struggling to make ends meet, and living from paycheck to paycheck is not much fun. Fortunately, there are ingenious ways of boosting your GBP bankroll by following common sense market advice. Let’s begin with the historic Brexit referendum on June 23, 2016. On that fateful day, Britons voted by a margin of 52% – 48% to separate from the EU. This referendum is not legally binding; it is an advisory referendum that parliamentarians have agreed to honour. You may be wondering what all of this has to do with boosting your GBP bankroll? Let’s examine a few key facts before we get into the meat of the matter:
- Prior to the Brexit referendum the GBP/USD pair was trading at 1.47. Within a short timeframe, the GBP/USD pair crashed to a 31-year low and was trading in the 1.21 – 1.25 range. The GBP/USD pair has a year-to-date depreciation of 16.74%.
- The FTSE 100 index has subsequently soared above 7,000, and is holding firm. As at Wednesday, 28 December 2016, the FTSE 100 index was at 7,068.17. The all share index has a year-to-date appreciation of 13.23%.
These two financial realities are not unrelated. The GBP has lost favour with the global economy owing to the uncertainty and volatility around a Brexit. If Britain breaks from the EU, what will become of all the economic, political and social relationships with the UK and the EU? This uncertainty is especially relevant to the financial sector. In November, the British Banking Association penned a letter to Prime Minister Theresa May urging a framework of negotiated settlements prior to a Brexit. As the GBP weakens, so the FTSE 100 index strengthens. A strong inverse relationship exists between the GBP and the FTSE 100 index. Some 75% of companies listed on the all share index generate earnings outside of the UK and when these earnings are repatriated back to the United Kingdom, they are worth more in GBP. Hence, a bullish index.
How can you use this information to increase your GBP bankroll?
Firstly, your objective is not to work more hours and earn more pounds. Your goal is to use the resources you have to maximise your GBP holdings. Let’s take a simple trade as an example:
Suppose you were trading binary options currency pairs. You know that the GBP is bearish and will likely remain that way until clarity emerges on the nature of a Brexit. Prime Minister Theresa May will have to invoke Article 50 of the Lisbon Treaty to initiate Brexit proceedings. Then, we need to ascertain whether she will adopt a hard Brexit approach or a soft Brexit approach. In either case, the GBP will weaken. The High Court recently granted a reprieve to the currency when it declared that Prime Minister May could not unilaterally invoke Article 50 of the Lisbon Treaty. The GBP rallied.
This geopolitical information is especially useful when you’re ready to trade currencies on your chosen binary options trading platform. Remember, the GBP is short-term bearish with potential to be long-term bearish. Overall, we can expect the GBP/USD pair to weaken as president Donald Trump embarks upon a massive fiscal stimulus program in the US. Further, we know that the Fed will be raising interest rates at least twice, perhaps three times in 2017. Monetary tightening and fiscal easing are catalysts for a stronger USD. Therefore, it is almost a certainty that the GBP/USD pair will weaken heading into 2017. This means that the USD will be worth more GBP at a future date than it is at present. In that sense, you can certainly boost your GBP bankroll by simply understanding the pulse of the market.