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Footsie continues higher, ignores BoE hikes

It looks like bulls have the situation fully under control as the FTSE 100 is on its way to record highs.

The British benchmark stock index – FTSE 100, also known as the Footsie – traded 0.3% higher during the London session on Friday, advancing every day this week despite a heavy macroeconomic calendar.

BoE delivers a dovish hike

As forecasted, the BoE increased interest rates by 50 basis points (0.5%) but also signaled that inflation may have peaked. As a result, the central bank raised interest rates to 4%, the highest level since October 2008, in an effort to combat inflation.

The Monetary Policy Committee voted 7 – 2 to increase interest rates by 0.5%, while Swati Dhingra and Silvana Tenreyro voted against the increase. Additionally, they voted for rates to stay unchanged also in December.

The Bank of England issued the following statement saying that global consumer price inflation continues to be elevated. Still, it is expected to have peaked in many advanced economies, including the United Kingdom.

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Regarding the future, the Bank indicated that more monetary policy tightening might be necessary “if there were signs of more persistent pressures.” This looked to be a shift from the Bank’s prior approach, as it had previously stated that it would “act aggressively if necessary” to signals of higher inflation and that “further hikes in Bank Rate may be necessary.”

US labor market in focus

The Bureau of Labor Statistics (BLS) will issue the Nonfarm Payrolls (NFP) statistics later today. The most recent NFP report is expected to indicate that the United States economy added 185,000 jobs in January.

After the US ADP private sector payrolls declined dramatically to 106,000 in January, below estimates of 178,000, compared to the prior reading of 253,000, a negative surprise for NFP cannot be ruled out.

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Moreover, the jobless rate is expected to increase slightly to 3.6% in January, while the US Average Hourly Earnings are forecast to increase 4.9% year-over-year, up from 4.6% in December.

“In December, more than 200,000 new jobs were created in the US. However, some details in the employment report point to a gradual weakening of the labor market. For example, the number of temporary workers shrank for the fifth month, a trend previously seen only in the run-up to recessions. In addition, the number of hours worked fell. Therefore, we expect job growth to decline to 180K in January.” Analysts at Commerzbank said.

Uptrend remains intact

As long as the Footsie index trades above previous highs in the £7,600 – £7,700 area, the long-term uptrend remains intact. The next target for bulls should be at 2023 highs near £7,900 and afterward at the psychological level of £8,000.

FTSE index daily chart

FTSE index daily chart, source: author´s analysis, tradingview.com

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