“EWU was already sliding lower on the charts ahead of last week’s fresh round of Brexit drama, having broken below support around $34.20 in early August,” according to Schaeffer’s. “And prior to that, the ETF had been trundling lower under the weight of a trio of daily moving averages, as displayed on the accompanying chart; not since June has EWU managed to close a session above all three of its 30-day, 50-day, and 80-day trendlines, which have swatted back every rally attempt in the meantime (with the near-exception of one finish flat with the 80-day on Sept. 27).”
The pound is off nearly 2% this month against the dollar. Without a hedge against volatility, U.S. investors interested in the growth in U.K. markets would be subject to the wild swings in the pound sterling. Since British stock are denominated in the pound sterling, a weaker GBP would mean that USD-denominated returns would be lower after a depreciating in the pound sterling.
If investors are worried about foreign exchange risks, the currency hedged iShares Currency Hedged MSCI United Kingdom ETF (NYSEArca: HEWU) and the Deutsche X-Trackers MSCI United Kingdom Hedged Equity ETF (NYSEArca: DBUK) outperform non-hedged U.K. exposure during periods of sterling weakness.
For more information on the U.K., visit our United Kingdom category.