FTSE drops as super-hot inflation sends UK yields higher
The big news this morning was from the UK and unfortunately it was not good: UK inflation topped double digits for the first time in 40 years. The Bank of England was correct, for once. Markets reacted negatively to the news with the FTSE and other European indices falling. GBP/USD rose then fell with the dollar finding support on haven flows amid growth concerns.
Headline UK CPI raced to +10.1% year-over-year in July vs. 9.4% last and 9.8% expected. Core inflation also rose sharply to +6.2% vs 5.9% expected. Inflation was boosted by rising food and drink prices, which made the biggest contribution to the change in the inflation rate.
The data sent UK bond yields sharply higher, as investors feared aggressive hikes will be on the way from the UK.
Rising interest rates are expected to hold back an economy already struggling. As the cost of living continues to rise – with food, raw materials and energy all costing more – household and business incomes will be squeezed. This should mean lower economic output. The BoE thinks we are headed for 5 quarters of negative growth. Against this backdrop, UK stocks should struggle you would think.
It is worth keeping a close eye on the FTSE in the coming days after its impressive recovery in recent weeks has sent it back near long-term resistance around 7500-7600 area. If we see the FTSE create a bearish-engulfing or a similar bearish pattern around these levels then it could pave the way for further follow-up technical selling in the days to come.
How to trade with FOREX.com
Follow these easy steps to start trading with FOREX.com today:
- Open a Forex.com account, or log-in if you’re already a customer.
- Search for the pair you want to trade in our award-winning platform.
- Choose your position and size, and your stop and limit levels.
- Place the trade.
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.
FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.
FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.
GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.
© FOREX.COM 2024