BOE preview: What’s the biggest risk for the UK economy?
Matt Weller, CFA, CMT March 15, 2021 2:31 PM
BOE policymakers seem increasingly split about the biggest threats to the UK economy...
A day after the Federal Reserve’s highly-anticipated meeting, Bank of England policymakers will convene for a high-stakes monetary policy meeting of their own. See our overview of the event, key themes to watch, and potential market implications below!
When is the BOE meeting?
The Bank of England will announce the results of its latest monetary policy meeting at 12:00 GMT on Thursday March 18.
BOE meeting: What traders need to know
While some observers were speculating about the potential for negative interest rates in the UK at the start of the year (see my colleague Rebecca Cattlin’s primer on negative interest rates in the UK here), the BOE’s bigger concern lately has been rising interest rates and fears of accelerating inflation as the economy gradually opens up in the coming months.
BOE policymakers seem increasingly split about the biggest threats to the UK economy, with BOE Governor Andrew Bailey recently noting that the risks of rising inflation were “increasingly two-sided”, although he said the bank was not about to raise rates. Separately, the central bank’s Chief Economist Andy Haldane struck an optimistic note earlier this month, suggesting that the UK economy may be poised for a strong, consumer-led surge through the latter half of the year.
On balance, we expect the central bank to avoid any immediate changes to its interest rates or asset purchases and merely emphasize that policymakers will continue to monitor incoming data to take appropriate action as needed. With all the uncertainty between Brexit, the ongoing COVID pandemic, and unprecedented fiscal/monetary stimulus, risk-averse central bankers may be more likely to stick to the status quo until the next move is clearer.
BOE meeting: FTSE 100 technical analysis
When it comes to country stock indices, the UK’s FTSE 100 hasn’t seen quite the impressive performance that US indices have, but the chart still looks generally constructive. The index found support at its rising 100-day EMA in both early and late February, and prices closed last week’s trading at a 2-month high near 6800:
Source: TradingView, StoneX
As it stands, the broader fundamental and technical backdrop for the FTSE remains supportive, so as long as the BOE refrains from tightening policy this week, the path of least resistance for the FTSE will remain to the upside. A confirmed break above the mid-February high at 6800 could open the door for a re-test of the post-COVID high at 6960 next. Meanwhile, only a break below the 100-day EMA near 6500 would erase the medium-term bullish bias.
Learn more about index trading opportunities.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.