Market Analysis: FTSE 100 Bounces Back on UK Inflation News

FXOpen Analysis -

Participants in financial markets were closely watching yesterday the data on inflation in the UK, where it is at the highest level among the G7 countries. The news turned out to be positive:

  • CPI was 7.9% (forecast = 8.2%, last month = 8.7%) in annual terms;
  • Сore CPI dropped from 31-year high from 7.1% to 6.9%.

Consequently:

  • the price of the British pound fell against the US dollar and other currencies;
  • the price of the FTSE 100 index rose sharply, rising from the July lows by about 5%.

Thus, the quotes demonstrate the expectations of market participants — they suggest that the Bank of England has received a reason to ease the ongoing tight monetary policy aimed at suppressing inflation.

The publication of the decision of the Bank of England is scheduled for August 3, and the interest rate can be raised only by 0.25%, although earlier 0.5% was called more likely.

The sharp rise in the price of the FTSE 100 has led to the fact that the descending channel is broken, as is the resistance level at 7,555. It is possible that after such a sharp impulse, we will witness a consolidation period, which may be limited to the levels of 7,555 and 7,690.