1.09 0.55%
    1.24 0.71%
    0.68 1.51%
    132.42 -0.28%
    0.63 0.67%
    0.91 -0.26%
    1.34 -0.6%
    144.37 0.26%
    0.88 -0.16%

FTSE down four consecutive days, undermined by inflation data

The FTSE index has been the weakest out of major EU indices as the BoE seems ready to start hiking rates in December.

The British FTSE 100 index, also known as the Footsie, has been underperforming other European indices as the ECB will keep monetary policy loose for the following year. Still, the BoE will likely deliver its first rate hike this year.

At the time of writing, the FTSE 100 index was down four days in a row, trading near 7,300 GBP ahead of the US session.

UK inflation continues to climb

Earlier today, the Office for National Statistics informed that consumer price inflation (CPI) rose to 4.2% in October from 3.1% the month before , climbing to the highest level in a decade as energy and fuel costs increased. Analysts had expected inflation to rise only to 3.9%. The CPI inflation is now two times the Bank of England’s 2% target.

The ONS said the “main upward pressure” came from electricity, gas, and other fuels after the energy cap was increased by 12% in October. Restaurants and hotels, education, furniture, household goods, and food and non-alcoholic beverages also contributed.

Core CPI inflation – excluded of volatile elements such as food and fuel – jumped to 3.4% in October from 2.9% previously , much higher than 3.1% anticipated by market participants.

Inflation rose steeply in October to its highest rate in nearly a decade. Increased household energy bills drove this due to the price cap hike, a rise in second-hand cars and fuel costs, and higher prices in restaurants and hotels, ONS chief economist Grant Fitzner said.

Everything looks set for the Bank of England to raise rates at its next meeting in December. Tuesday’s splendid UK job market numbers also helped the narrative of hiking rates. However, it looks like the market is currently priced for more rate hikes in 2022 than the BoE will likely deliver.

Nevertheless, the Pound remained close to its one-year lows against the greenback. However, a possible reversal is forming as the pair is trying to close above previous lows of 1.3415.

Should we see a rally in the GBP/USD pair, it might undermine the Footsie index further as those two are usually negatively correlated to each other.

Later in the day, several FOMC governors are due to speak, possibly influencing the US markets but likely moving the FTSE index as wel l, especially if they sound overly hawkish.

The key support level now lies in the 7,270-7,280 GBP region, where previous highs are converged with the short-term uptrend line from September and October lows. If the index drops below that support, the medium-term outlook could change to bearish.

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