Briefly –
- FTSE 100 has exhibited a massive bullish trend.
- The index has gained 13.5% from this year’s low.
- Concerns about the United Kingdom economy being in deep recession persist.
Pivot hopes by central banks have seen the FTSE 100 recovering modestly within the last few weeks. It soared to the peak of 7,633 pounds – the highest mark since June. Meanwhile, the recovery saw the Footsie turning positive, indicating that they outshined their American rivals like Nasdaq 100 and Dow Jones indices.
UK Stocks Revival Accelerates
The FTSE 100 has recorded a modest recovery despite worries about United Kingdom’s economic slump. A Monday report had the CBI warning that the UK may suffer a year-long recession in the coming year, citing escalated inflation.
The organization predicts a 0.4% economic contraction in 2023 amid deteriorated investment environment. Meanwhile, it recommended the government unlock business investment through moderating regulations, revising the immigration structure, and alleviating blocks to an onshore breeze. CBI believes these policies will unlock capital investments worth nearly 50 billion pounds.
Also, FTSE 100’s recovery matched the British pound’s rebound. The sterling has rebounded over 18.8% rebound from its 2022 lowest mark. That came after the currency slumped to its lowest since the 1980s.
A crucial trigger from GBP/USD and FTSE revival is the stance that the Federal and the Bank of England will slow the rate hike pace. Last week’s remarks had the Fed Chair Powell hinting about a potential 50bps hike in December. In the meantime, UK’s inflation will likely see the Bank of England lowering its rate hike size during next week’s meeting.
Also, analysts expect a 50 basis points hike from BoE in December. The primary FTSE 100 drivers over the last 30 days were ABF (Associated British Foods, Prudential, Centrica, Fresnillo, and Hikma Pharmaceuticals. These stocks have gained more than 17% in this timeframe. Meanwhile, BP, GSK, Shell, Persimmon, and Vodafone were the leading laggards.
FTSE 100 Prediction
The daily timeframe indicates that FTSE 100 has witnessed a massive bullish trend within the last few weeks. This period saw the index moving beyond all MAs, whereas the Moving Average Convergence Divergence kept surging. The RSI (Relative Strength Index) approaches the overbought mark, following upside moves.
Moreover, FTSE 100 rose beyond the crucial resistance mark at 7,520 pounds – the highest mark since 13 September. Thus, the index might remain elevated as buyers target the massive resistance at around 7,690 pounds – the highest mark since February.
FTSE 100 Weekly Chart
FTSE 100 has hovered within a consolidation phase over the last eleven months. 2022 saw two new lows. Thus, considering this year’s corrective price action, a breach of the shaded primary zones (as the daily chart demonstrates) would indicate a possible bullish continuation on the weekly chart. Remember, the United Kingdom’s current economic outlook isn’t the healthiest.
Moreover, the predicted economic picture isn’t attractive as the United Kingdom struggles with supply problems and increased rates as it targets to trim the around 11.1% inflation. It may need massive power to breach the peaks. Otherwise, rather than breaking the highs, we may witness the FTSE 100 stalling to rotate downward before extending corrections.
What About GBP-USD?
GBP-USD has traveled inside an ascending channel, suggesting that the current GBP-USD bullish cycle remains corrective. Thus, the lucrative probability of a Dollar tale means more downward rallies. FTSE 100 and GBP-USD positively correlate. FTSE 100 shares sell in dollars, not sterling. Meanwhile, bulls are losing steam, and prices may rotate downward or stall.