FTSE Higher After Fed 50bp Cut and Ahead of BoE MPC Meeting

The Fed cuts rates after 4 years, as the market expected, by 0.50%, creating a mixed reaction in global stocks.

The market was mostly expecting this move from the Fed, but the reaction has been subdued even though U.S. and global stocks are mostly higher on the day. The FTSE recovered some of the lost ground yesterday.

Today’s session shows a gain of 0.66% as the market awaits a decision from the Bank of England. Analysts widely expect the BoE to keep rates on hold at today’s MPC meeting.

However, the fact that the Fed lowered rates helps the perception that the BoE will follow suit sooner than later. The BoE has made it clear that the path is not easy and clear at the moment. As mentioned in yesterday’s post, the central bank wants to see clear evidence that inflation is cooling.

Tomorrow we’ll get U.K. Retail Sales, which analysts expect will show a decline in consumer purchases. Forecasts expect MoM Retail Sales to slow down to 0.4% from 0.5% last month. While excluding fuel the decline is expected to be from 0.7% last month to 0.5%.

Technical View

The day chart above for the FTSE shows a market that is still in a wide sideways trend. The lack of momentum is also indicated by the RSI, which has fluctuated within a tight range between 37 and 63.

To consider the market as gaining a new trend we would need to see a close above the latest high or below the recent low. To the upside, we would look for a close above 8,419 (red line), and to the downside, a close below 7,910 (black line).

That’s a particularly wide range, but unless the market breaks out of that, technically we can consider that market as range bound. The market will find immediate support on the previous high of 8,278 (blue line), and further down on the Ichimoku cloud.

To the upside, the main resistance is at 8,419, however, we would need a close above the all-time high of 8,481 to consider that a bull trend has taken hold of the market.