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FTSE Shrugs Off BOE Rate Hike
Despite the Bank of England recently hiking UK rates to their highest level in 14 years, the FTSE has today hit a new all-time high. The index had been higher on the back of the BOE meeting as traders focused on the expected, forthcoming end of the BOE’s tightening program. Front-running anticipated policy changes has become a key part of modern trading dynamics, so much so that in many cases the forward guidance offered at the meeting is more important than the decision itself.
Tightening Nearing End Point?
In this case, while the BOE hiked by a further .5%, as expected, governor Bailey noted that inflation had likely peaked. Traders took this as a sign that BOE rates are either at or very near their peak and as we saw with the USD following the FOMC and EUR following the ECB, GBP was seen falling in response to the hike.
UK to Avoid Recession?
Since then, the FTSE has been further bolstered by news this week that a new report from the National Institute of Economic & Social Research projects the UK to avoid a recession this year. The report comes hot on the back of the IMF’s prior warning that the UK would be the only country in the G7 to suffer a recession, performing worse even than Russia. The BOE itself has recently altered its outlook slightly forecasting that, while a recession would still be seen, it would likely be milder than previously thought.
Clearly, traders are focusing on the more optimistic outlooks in line with the view that inflation has peaked and BOE tightening is coming to a quick end. Near-term, the FTSE looks likely to remain supported unless we see or hear anything to materially challenge this view.
Technical Views
FTSE
The recent retest of 7678.8 support has seen the index turning higher once again. Price is now attempting to break out above the 7904.7 highs, marking a continuation o the bull channel. Momentum studies are turning higher here, supporting a fresh move though we are seeing bearish divergence. Any downside break of the channel lows and 7678.8 level should come as a warning with risks of a deeper correction seen below.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.