FTSE Falling Further

The FTSE remains under pressure today with the index now down more than 3% from the YTD highs. Following a strong rally over late Feb – mid May, the index is now retreating as traders scale back their near-term BOE rate-cut expectations. Much of the preceding rally had been built on the expectation that the BOE was moving towards a rate cut as early as June, in line with falling inflation data and a weaker economic outlook. However, a recent strengthening of UK data, including upside GDP surprises, has seen traders reversing calls for an early summer cut.

Inflation Still Key

While inflation was seen falling further last month, at 2.3% headline CPI was above the 2.1% the market was looking for. Many traders feel that the BOE will now wait for once further push lower in inflation (back down to or below target) before actioning a rate cut. Indeed, with the UK PM having called a snap election for early July, a rate cut in June looks less likely now.

Bearish Risks

GBP has been trading on a much firmer footing following last week’s data, adding further bearish pressure. While this narrative holds (no June rate cut), FTSE looks likely to remain tilted lower with the index currently on course for its longest losing streak since August 2023.

Technical Views

FTSE

The pullback in the FTSE is gathering pace and with little in the way of technical support until a retest of the broken 8023.5 highs, this looks to be the clear target for bears. Bulls will need to defend this area to maintain the broader bullish outlook or risk a test of deeper support at 7811 next. 

(Click on image to enlarge)

More By This Author: