Where we are: The FTSE 100 is trading around 8,395 in early London trade, consolidating gains made in the previous session. The index is holding above its 50-day moving average and is within striking distance of recent highs. The overnight range has been relatively tight as traders await fresh catalysts from across the Atlantic.
What’s driving it: UK inflation figures, while still above target, are showing signs of stickiness. The latest CPI print came in at 3.3% YoY, a modest increase from the previous 3%, and core CPI remained unchanged at 3.2%. This suggests the Bank of England may maintain its current cautious stance on monetary policy, with the market currently pricing in a higher probability of a rate hold in the near term. This expectation is slightly offsetting the positive sentiment stemming from improved risk appetite and stabilization in global oil prices, as domestic rates are being kept higher for longer.
- Claimant Count Change data is due to be released at 07:00 London; forecast is 23.1K, with previous at 26.8K — a better-than-expected print may suggest further strength in employment.
- Average Earnings Index, also at 07:00 London, is expected to remain unchanged at 3.8% — a higher print could reignite wage-price spiral concerns.
- The FCA and Bank of England’s joint vision on tokenisation suggests an innovative approach to financial markets which may be a positive catalyst for the FTSE 100 long term, even if current impact is minor.
NY session focus: All eyes will be on US 2Y and 10Y yield curve movements. The VIX continues to trade around 18, which means the market is still seeing some risk as the US 10Y real yield rose to 2.1% on Friday. No major US data releases are scheduled before the NY session opens, meaning that pre-existing sentiment will likely dominate the trading landscape. Key levels to watch for the FTSE 100 are 8,350 for support and 8,450 for resistance. The current trade is to continue to hold long FTSE positions, but the risk trade is any hawkish communication from the Federal Reserve. The pain trade for the FTSE 100 would be a rapid and unexpected rally in the DXY alongside a sharp decline in Brent crude prices, exacerbating inflation concerns.