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FTSE 100 little changed ahead of the BoE

• BoE is expected to leave rates unchanged
• This could be a very finely balanced meeting
• FTSE 100 trades near its record high

The FTSE is unchanged, hovering around its record high ahead of the BoE rate decision.

The market is pricing in a 33% chance that the central bank will cut rates in what is expected to be a finely balanced decision. The vote split is expected to be 3-6, but it could be even closer with BoE governor Bailey taking the deciding vote amid a divided committee.

Just a few weeks ago, expectations had been close to 0 for another rate cut this month. However, CPI in September was cooler than expected at 3.8%, peaking at a lower level than the 4% forecast.

There is also uncertainty surrounding the upcoming November 26 Budget, where the Chancellor is expected to hike taxes, which would slow the UK economy, accelerating the deterioration in the labour market, further boosting the case for more rate cuts.

However, the hawks on the BoE could argue it's prudent to wait for the Budget, as tax hikes would add inflationary pressures, as they did last year.

The pound is trading at a 7-month low against the USD and a multi-month low against the euro, which has been beneficial for the multinational companies on the FTSE, helping the index rise to record highs. A dovish pause by the BoE could pull GBP lower and lift the FTSE higher.

Earnings are also in focus with Sainsbury’s raising its full-year outlook after delivering H1 sales and profits ahead of forecasts.

AstraZeneca beat Q3 earnings expectations, helped by strong sales of its cancer, heart, and kidney disease drugs.  
 

FTSE 100 forecast – technical analysis

The FTSE 100 trades within a rising channel dating back to early May. The price extended gains to a record high of 9800, before easing back slightly to 9770.

Buyers, supported by the RSI above 50, will look to rise above 9800 to fresh record highs. With blue skies above, the round number 9900 is the next logical target.

Immediate support is at the 9690 zone, and a break below here brings 9575, the November low, and the 20 SMA into focus.

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EUR/USD rises ahead of retail sales

• EUR rises on improved mood & outlook
• Retail sales expected to rise 0.2% YoY
• USD trades at a 5-month high
• EUR/USD trades in a falling channel

EUR/USD is rising, recovering from a three-month low as risk sentiment improves and investors look ahead to retail sales data.

Equity markets are rising, bouncing from recent losses, reflecting the improved market mood and better-than-expected European corporate earnings, which, combined with yesterday’s stronger-than-expected PMI data, is easing concerns over the region's economic outlook. The brighter mood is benefiting the EUR while reducing USD safe-haven demand.

However, gains in the euro could be limited as the US dollar remains firm following yesterday's stronger-than-expected ADP payroll figures and service sector activity that accelerated to a faster pace than forecast. These figures cast further doubt on the Federal Reserve's December interest rate cut and are likely to limit any USD downside.

Today, attention will be on Eurozone retail sales, which are expected to rise 0.2% MoM up from 0.1% in August. Stronger-than-expected sales credit helps the EUR.

The US economic calendar is quiet; instead, the focus will be on a slew of Fed speakers. The market will be listening for further clues on the likelihood of a December cut, which it is pricing at 62%.
 

EUR/USD forecast - technical analysis

EUR/USD trades within a falling channel. The price faced rejection at the 50 SMA, falling to a low of 1.1470.

Sellers, supported by the RSI below 50, will look to extend the bearish trend towards 1.14.

Resistance can be seen at 1.1550. A rise above 1.1665 opens the door to 1.1670, the 50 SMA. A rise above here creates a higher high.
 

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