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FTSE up on BoE interest rate conundrum

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The FTSE is in positive territory this morning, up 20 points in early trading following the Pound’s decline against its major pairs following yesterday’s inflation report and Bank of England Governor, Mark Carney’s comments.

UK inflation is close to overshooting the Bank of England’s target levels following yesterday’s CPI release which would, generally, see a boost for the Pound as expectation increases for an interest rate hike.

“However comments from Governor Carney’s and the committee members caused investors to dump the pound, as they suggested they thought inflation would peak around its current levels.” suggested ADS Securities analyst, Konstantinos Anthis. “This cast doubts as to whether the BoE is ready to pull the trigger next month and instead will give the economy more time to adjust on its own.”

FxPro analyst Edward Anderson added “The likelihood of a rise in UK interest rates, for the first time in a decade, gained momentum on Tuesday as UK CPI edged up from 2.9% to 3.0% – its highest level since April 2012. With poor economic data, uncertainty over the Brexit process and a squeeze on real earnings the Bank of England’s decision to hike rates is delicately balanced.”

Today, the focus will be on UK unemployment and earnings figures. Expectations are set for a steady printing but a printing higher or lower than expectations will have an impact on the Pound and the FTSE. “Expect Unemployment unchanged, but average weekly earnings may cool a touch, actually soothing inflationary concerns” commented Accendo Markets analyst, Mike van Dulken.

Over in the US, Wall Street closed a mixed session yesterday with more records for the S&P500 and the Dow Jones, with the Nasdaq falling short. US companies reporting include American Express, eBay, United airlines owner United Continental and Ashtead sector peer United Rentals.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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