Where we are: The FTSE 100 is currently trading at 22888, up 87 points or 0.38% on the day, having traded in a range of 22684-22939. The index is attempting to build on yesterday’s rebound, spurred by easing UK gilt yields. The Footsie remains below intraday highs printed earlier this morning, and is positioned to challenge the overnight high heading into the NY open.
What’s driving it: Domestic gilt yields are providing the primary impetus, with the UK 2-year yield down 8bp to 4.317% and the 10-year down 5bp to 4.879%. The Bank of England’s Market Participants Group meeting minutes released this morning is unlikely to impact market sentiment, but traders will be looking for any colour Governor Bailey might offer later in the session. The move is amplified by a softer dollar, with the DXY currently at 97.77.
- UK 2Y yields are down 8bp, reflecting a possible dovish shift in rate expectations.
- The FTSE 100 outperformed European peers, potentially indicating relative value given the improved UK macro picture.
- The 2s10s curve has steepened, which may reflect a reassessment of the UK’s long-term growth outlook.
NY session focus: All eyes will be on BOE Gov Bailey’s speech at 13:20 London. Watch for any comments on the recent CPI figures and the path of future rate hikes. Key levels to watch include resistance around 22950, with a break above potentially opening the door to a test of 23000. Support lies at 22700. The trade that’s working is long FTSE on dips, but the risk is a hawkish surprise from Bailey sending gilt yields higher and weighing on the index. The pain trade is a dovish Bailey catalysing a major risk-on move, leaving Footsie lagging Wall Street.