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Crisis

FX market

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FX market

  1. In the period before the referendum, both trends are uptrends, which are the same. Therefore, in both markets, the conditions are similar, and they are working in favor of the position of the traders. The trends signify that the demand for the assets in both markets is higher than the supply. Therefore, the prices were expected to continue moving upwards. However, the trends after the referendum are different, in that in the FX market, there is an uptrend, while in the FTSE100 market, there is a constant trend in the market prices. Hence, there were different market conditions in the two markets after the referendum. However, the conditions favored both markets since, in the FTSE100 market, the prices, yet constant, were slightly higher than before the referendum. On the other hand, the prices in the FX market moved upwards. It is an indication that in both markets, the demand for assets became higher than before.
  2. f) Before the referendum, both markets exhibited bullish tendencies throughout the years. Possibly, it could be because the economy was on a recovery path, and the confidence of the investors continued to improve. Therefore, the investors who had held back their cash in the time of crisis had started to invest. As a result, there was high demand and a low supply of assets in the markets since the investors who had shares were unwilling to sell them in anticipation of further growth that would follow the recovery in the market. The resulting situation of higher demand than supply led to the upward price trend. After the referendum, buyers in both markets were forced to increase the prices of their securities since these markets were already illiquid. However, in FTSE100, the prices rose at a constant rate, while in FX, the prices rose steadily. The reason behind this might be that FX had fewer shares in the market compared to those in the FTSE100 market. Also, the FX market might have anticipated dividend payments. At first, most firms announced profits that were earned the previous months and proposed for dividends. Hence, as the investors bought shares to receive dividends, demand increased, resulting in an upward trend in the market after the referendum.

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