FTSE: UK Stock Market Flat Awaiting BoE MPC Meeting
The Bank of England meets today and will issue its interest rate policy at 13:00 CET.
The market has begun fostering the perception that the BoE may cut interest rates from their 16-year high today. Many analysts believe that the voting at the meeting will be a close call. The consensus is that there is a 50% chance of a rate cut.
At the last meeting 2 committee members voted in favor of a rate cut. With inflation declining and an economy that is faltering, many pundits believe the time may be right to ease monetary policy.
Manufacturing data today showed a sharper than expected decline in manufacturing activity. The HCOB Manufacturing PMI declined to 50.9 from 52.1 the previous month. For dovish members of the MPC, more evidence the economy is struggling.
The market has been gearing up for a very possible rate cut, and that’s visible from the 5-session rally that has taken the FTSE to the current levels. The market will certainly need a rate cut to keep bullish momentum alive.
But I would say a high member count in favor of a cut, which would be 4 members out of 9, may still give the stock market some fuel. If the number of members voting in favor of a cut increases, then the likelihood of a rate cut in September grows stronger.
Technical View
The day chart below for the FTSE shows a market that is still in a bullish trend. The sideways trend through the Ichimoku cloud ended last Friday. When the market broke above the cloud and tested a major resistance level at 8,367 (red line).
Today’s candle is floating around the level as the market waits on the outcome of the MPC vote on rates. If today’s candle closes below the resistance level at 8,367, we will most likely see a retracement to the top of the cloud.
The market would find further support at the bottom of the cloud, and then lower down at the low of 9,049. To the upside, the next major resistance would come from the all-time high of 8,481. (orange line).
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