UK Inflation Lower than Expected & Renewed Risk-on Sentiment Push FTSE Higher

Global stocks regain confidence after yesterday’s tech rally, geopolitical fears subside, and focus turns to Fed action.

The NAS100 placed a rally yesterday of 2.57%, reinvigorating the AI bets in tech stocks and helping stocks globally. The UK published core inflation at 3.3%, down from last month’s 3.5%. The number also beat most analysts’ expectations which forecast the number at 3.4%.

The US tech stock rally and the positive inflation numbers helped the FTSE open up 0.50%. While concerns about military intervention from Iran in Israel have subsided, allowing investors to focus on their risk appetite.

Hopes are increasing today for a possible second consecutive rate cut by the BoE in September. Today’s UK inflation number shows price increases are stabilizing, with 4 consecutive months of inflation at or close to 2%.

The market is now waiting to see inflation data from the US this afternoon. Most economists expect a decline in US inflation from 3% to 2.9%. Which is a drift in the right direction for dovish policy from the Fed.

However, Fed officials have repeatedly stated that their most watch inflation metric is the PCE. The next data for PCE will be released on August 30, just in time for the FOMC meeting in September.

Technical View

The day chart below for the FTSE shows a bear trend undergoing a major correction. Today’s candle and the previous one have both met resistance from the top side of the Ichimoku cloud.

A break above the cloud with today’s candle would also coincide with a break above a resistance level at 8,278 (blue line). If that were to occur, we could expect further highs. The next resistance level would be at 8,411 (red line).

If the next resistance level is broken the market would find further resistance at the all-time high of 8,481 (orange line). To the downside, the market will find initial support on the bottom of the cloud. Further down, the market will find support at 8,036 (black line) and 7,910 (grey line).

ABOUT THE AUTHOR See More

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.

Related Articles

FTSE Places Largest Rally Leg on Record – Faces Technical Hurdle

2 weeks ago

Save

DAX Rally Holds Despite Weak Data & Tariff Concerns

3 weeks ago

Save

FTSE Muted After Consumer Confidence Drop Outweighs Retail Sales Jump

3 weeks ago

Save

Comments

Leave a Reply Cancel reply

You must be logged in to post a comment.