Where we are: The FTSE 100 is barely clinging to positive territory, currently trading at 22590, up just 7 points or 0.03% on the day. After a weak open in Asia, the index remains near a three-week low. The intraday range has been a tight 22582-22682. The flat performance mirrors a similar lack of conviction across European bourses.
What’s driving it: It’s a holding pattern ahead of a deluge of central bank decisions this week, including the Fed, ECB, BoJ, BoC, and BoE. Traders are hesitant to commit ahead of these key events. Geopolitical risks surrounding Iran are bubbling beneath the surface, but not yet a dominant driver. A weaker DXY, now at 98.14, should be supportive, but its impact is being offset by the risk-off tone in bonds.
- Oil price strength (Brent above $107) is providing a modest tailwind, particularly to energy majors like Shell and BP.
- US 10-year yields are inching higher, currently at 4.323%, a headwind to risk sentiment overall.
- The flat breakeven inflation rate of 2.42% suggests the market isn’t buying the inflation narrative just yet, limiting upside in cyclical sectors.
NY session focus: With no major data releases scheduled before the NY open, the focus will remain on positioning ahead of Wednesday’s Fed decision. Watch for any further weakness in the DXY, as this could provide a short-term boost to the FTSE. Key level to watch is 22682; a break above that could signal a renewed bullish bias. Conversely, a drop below 22582 would open the door to further downside. The working trade right now is fading bounces, but a sustained break above 22700 would invalidate that thesis. The pain trade for the FTSE is a hawkish surprise from the Fed, sending yields soaring and the DXY rocketing higher.