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FTSE: Election Woes Take a Back Seat as Market Awaits BoE MPC Meeting

ftse flat awaiting bank of england meeting

The market is widely expecting BoE MPC meeting to keep rates on hold, the driving question is how many committee members will vote for a cut.

Since the general election was called the market has been concerned about a possible Labour party victory. Voting intention surveys appeared showing the Labour party was well in the lead cementing these concerns.

Today’s market opened with a bullish sentiment as the focus shits to today BoE meeting. The result is unlikely to give any surprise. However, the market is looking for confirmation of the 2 votes for a rate cut.

Or even better for the market, a third committee member adding a vote for an interest rate cut. The latest inflation data showed that price increases had slowed the BoE’s target 2% rate. This level hasn’t been reached for 3 years.

The conclusion from some analysts is that the BoE is on track to cut rates in Q4. A could indication of this view is bond yields. 10-year Gilt yields have dropped from 4.214% 1 month ago to 4.067%, reflecting a consensus of lower rates ahead.

Technical View

The day chart below for the FTSE shows a bullish trend with the market above the Ichimoku cloud. The past 5 candles have found support on the cloud after a correction from the all-time high of 8,480.

The Doji Star candle from June 14 is typically a signal of a reversal of the market, and it coincided with support from the cloud. However, other factors coming into play such as the oncoming general election have created uncertainty.

Which can be seen by the small candle bodies over the past 3 sessions. Today’s candle is limited by the resistance level set by the 0.236 Fibonacci retracement level of 8,241. While it has support from the cloud.

We need to see a break above the Fibo resistance level (red line), to consider a possible move higher. The next resistance level would be the ATH at 8,480 should that happen. To the downside the next support is the 0.382 Fibo level of 8,095 (orange line).

FTSE
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Gino Bruno D'Alessio
Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.
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