Trade Sterling Following Record Decline in Spanish Retail Sales

LONDON, May 30, 2012 /PRNewswire/ --

As Spain's retail sales incurred their biggest fall since 2003, we show you how you can trade sterling with CFD trading provider City Index.

Declining Retail Sales

On Tuesday 29 May 2012, a reported 9.8% decline in sales was reported for the month of April compared to the same period in 2011.

Not only did this fall mark the 22^nd consecutive month of declining sales, but it also came as a shock to investors who did had not expected such a sharp fall in sales.

Sterling Offers Investors a way to trade Euro weakness

The retail sales figures out of Spain came as another blow to the Euro following ongoing negative news out of not only Spain but Greece and Italy also.

As a result, investors trading on the global currency markets are looking to take shelter away from the Euro for fear of potential eurozone fallout.

In early morning trading on Tuesday 29 May, sterling strengthened against the euro to hit a EUR/GBP price of £0.7979 in the market.

How to Trade Sterling

With a CFD trading account, you can take a position on over 10,000 financial instruments; including major, minor and exotic pairs in the global currency market.

In the example below, we look at how CFD traders can go short and sell a currency pair, such as the EUR/GBP following negative economic news out of Europe that is causing sterling to appreciate in value.

In example below, let us say that through the CFD trading platform, the EUR/GBP CFD price is £0.8110/0.8112.

Going Short on the EUR/GBP currency pair

Following negative economic news out of Europe, you expect sterling to strengthen (appreciate) as investors look to take advantage of expected Euro weakness in the global currency markets.

You decide to sell (go short) 2 CFDs of EUR/GBP at £0.8110.

The Pound Sterling Appreciates i.e. Euro weakens

You were correct and the sterling appreciates against the Euro, forcing the currency pair price lower. When it reaches £0.7979, you decide to cash in your profits.

The new price is £0.7977/0.7979 and you buy back 2 CFDs at £0.7979.

The Result: You sold at £0.8110 and bought back at £0.7979, a price move in your favour of 131 pips, which at a stake of 2 CFDs nets you a profit of £262 (£0.8110 - £0.7979 x 2 CFDs).

The Pound Sterling Depreciates i.e. Euro strengthens

Alternatively, has the sterling depreciated against the Euro to £0.8241, you would net a £262 loss (£0.8110 - £0.8241 x 2 CFDs).

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.

SOURCE City Index