The British pound reached a 26-year high against the dollar this week, so what does this mean for U.K. related exchange traded funds (ETFs)? Interest rate changes – and the anticipation of them – can have affects on markets and currencies around the globe. The pound remained high this week on expectations the Bank of England would raise rates. They did raise rates to 5.75%, which is the highest in six years. Wayne Ma of MarketWatch reports this caused the pound to pull back slightly from its high.
Investors can use ETFs to gain exposure in foreign markets and currencies. CurrencyShares British Pound (FXB) is a currency based ETF, which tracks the British currency. For the last week, it is up 0.3% and 5.2% for the year. Recently launched iPath GBP/USD Exchange Rate ETN (GBB) is up 0.35% for the week. iShares MSCI United Kingdom (EWU) is an ETF focusing on companies in the U.K. It is up 1.4% for the week and 10% year-to-date.
When investing, set stop-loss points. While there are times when investing in foreign currencies or markets (or any area for that matter) make sense, things can change. You don’t want to follow a trend down.
Read the disclosure, as Tom Lydon is a board member of Rydex Investments.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.