Open account
☰
Open account
✖

FTSE analysis: UK stocks extends rally on dovish BoE

Article By: ,  Market Analyst
March 21, 2024 4:00 PM
  • FTSE analysis: Dovish BoE sends UK stocks higher, pound lower
  • SNB cuts rates while bets over ECB cuts increase on the back of poor PMI data
  • FTSE analysis: technical levels and factors to watch

 

It has been a stellar day for the FTSE for a change, with the UK index outperforming with gains of 1.5% to sit at the top of the global leader board. Only a handful of stocks were in the red, with miners and banks dominating the top of the index. Today’s big rally means the index may be hit with mild profit-taking, but any short-term dips could be bought as the bullish momentum slowly gathers pace following the index’ key technical breakout last week.

 

FTSE analysis: Dovish BoE sends UK stocks higher, pound lower

 

The FTSE has been boosted by expectations that the Bank of England is going to start cutting rates in the coming months, with markets pricing in three 25bps cuts for 2024 with the first one in June. This comes after the BoE Governor Bailey said the UK economy is “moving in the right direction” as the Bank held rates unchanged with one member voting to cut. The other 8 all voted for no change. A couple of hawkish officials (Catherine Mann and Jonathan Haskel) who had previously demanded to hike rates, dropped their calls.

 

BOE Governor Andrew Bailey said the UK is “on the way” to winning its fight against inflation. In another dovish twist, Bailey also said that the MPC will need to “act ahead of time” on policy moves, which means that it doesn’t need to see inflation “come all the way down to a sort of sustainable level consistent with the target” before cutting rates. What’s more, Bailey thinks bets on three rate cuts this year are “reasonable” now that inflation has fallen to its lowest level in two-and-a-half years in February.

 

We also saw the probability of a rate cut by the European Central Bank rise with markets pricing in three 25 bps cuts by year end, while the Swiss National Bank surprised with a rate cut this morning. The day before, the US Federal Reserve signalled that three cuts are in store in this year. With all these central banks indicating that interest rates are heading lower, global stock markets rallied across the board.

 

 

FTSE analysis: technical levels and factors to watch

Source: TradingView.com

 

I have been highlighting the possibility of this type of a breakout on the FTSE in a number of my recent FTSE analysis articles. Well, today the breakout was already on the way before the BoE meeting. But it then continued to push higher as more and more resistance levels broke down. With the index looking set to close well in the green today, any short-term weakness in the coming days could be bought. After all, it has just recently broken above a 10-month consolidation pattern. So, more gains should be expected moving forward. It is important that former resistance levels now turn into support on any short-term pullback. Among these, the December highs that has recent been broken at 7769 is now the most important support level to watch. Ahead of this comes last week's high at 7785.

 

On the upside, there are not many obvious reference points to watch now until the until the February 2023 all-time high at 8046. Round figures such as 7900 and 8000 are additional levels to watch for potential profit taking.

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

 

How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    • Open an account in the UK
    • Open an account in Australia
    • Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

 

 

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

© City Index 2024