Next week holds a big day for one man in America. Jay Powell, a current Fed Governor, will go through a gruelling job interview that could see him become the next Chair of the Federal Reserve. But why would this affect someone who trades the UK 100 ?

It all comes down to the US dollar.

While it may be the UK’s blue chip index, the UK 100 has a massive international representation. Up to 75% of profits made by the listed companies are made abroad, with a significant proportion of those selling their products and services in dollars.

Popular examples include the two Oil majors BP and Shell, who sell the barrels that they drill in USD. When they come to announce results, the foreign exchange impact can make their profits look more attractive to investors, thus pushing up their share price. This has a similar impact on the heavily-weighted Mining sector as both base and precious metals relies on the US dollar to price base and previous metals.

This also works in reverse. For example, should Sterling rally against the dollar, those companies would then report much lower revenues due to the unfavourable climate, and could see their share prices decrease as a result.

Here lies the importance of the relationship.

So when Powell steps up to be grilled at the Senate Banking Committee hearing next Tuesday, it could have a major influence on the UK 100 . Outgoing Fed Chair Yellen has been perceived by the market as a Dovish economist – she has been hesitant to raise interest rates in order to bolster the US dollar and sectors such as Banks. However Powell, a former investment banker and Republican administration adviser, has been nominated by President Trump as a more hawkish candidate.

If he were to play up to this label, suggesting that US interest rates could rise at a faster rate under his leadership, this could boost the US dollar and subsequently the UK 100 .

With the index within 2.5% of all time highs – under 200 points – the meeting could literally mean the difference between fresh all time highs in the coming weeks or a return to September lows of 7200, over 200 points below the current price. Furthermore, with Trump Tax Reforms likely to headline the agenda after Thanksgiving, the Dollar will be subject to some strong moves over the next five days.

So when your broker suggests to keep an eye on events in Washington, it may just be worth keeping an eye out to stay ahead of the trend.

With a wide range of potential drivers, sometimes it can be tricky to sift through the vast swathes of global news to find a specific reason for a stock or index to be behaving the way that it is. Thankfully, that’s where your Accendo Markets trader and our research team come into the picture.

We let our clients know a Week in Advance of the important events on the horizon, as well as digesting the key drivers of global equity markets in our Index Focus publication. You can get access to both of these publications, and the rest of our award-winning service, by signing up here.

Krish Appiah, Trader, 24 November