FTSE Holds Support

The FTSE is stabilising today following sharp losses across yesterday’s session. The index suffered an almost 2% drop yesterday amidst a general weakening of risk appetite in response to rising geopolitical risks linked to the conflict in the Middle East and a fresh rally in the US Dollar. The greenback continued to strengthen yesterday on the back of Monday’s better-than-forecast US retail sales prints, with the DXY breaking out to fresh highs for the year. With traders now pushing out forecasts for initial Fed easing from June to September, risk assets have come under pressure this week.

UK CPI Slips Again

On the data front, the FTSE was helped this morning by news that UK CPI fell back to 3.2% last month, down from 3.4% prior. While slightly above the 3.1% the market was looking for, the data shows that inflation is once again heading in the right direction and is now back at levels last seen in September 2021.

BOE Easing Expectations

The data should help refocus the market on BOE easing expectations, particularly on the back of yesterday’s report which showed UK unemployment rising in the three months through February. Indeed, the bank will be buoyed to see that inflation came down last month despite data showing that wages remained at 5.6% in the three months through February.

Near-Term Outlook

Looking ahead, FTSE looks likely to remain highly sensitive to global risk flows. Any fresh headlines regarding further conflict between Iran and Israel are likely to drive prices down. However, if the situation looks to be claiming at all this should help revive risk appetite.

Technical Views

FTSE

The rally in the FTSE has stalled for now into a test of the 8023.5 level, with price reversing following an attempted breakout above the level. The index is now retesting support at the 7811 level and while this area holds, the focus is on a fresh push higher. Should we break here, however, 7678.8 will be next support to note. 

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