FTSE 100, EUR/USD Forecast: Two trades to watch

FTSE 100 rises to record levels ahead of the BoE rate decision

BoE expected to cut rates by 25 bps to 4.5%
Economic projections & Bailey’s statement will be key
FTSE trades t record levels below 8700

He fits the 100 is opened almost 1% higher amid improving market sentiment across Europe and the US on eating trade tensions with President Trump and the head of the Bank of England interest rate decision later today.

The central bank is expected to cut interest rates by 25 basis points to 4.5%, marking the third rate cut this easing cycle. In the December decision, three policymakers voted to cut rates. This time, the vote split will likely be 7-2 or 8-1.

Given that the right parts are expected, the market will pay close attention to Bank of England governor Andrew Bailey's statement for further clues about the outlook for interest rates. Update growth and inflation forecasts will also be in focus.

Whilst UK headline inflation is 2.5%, it is still above target. Service sector inflation also cooled to 4.4%, down from 5%. While my office is a step in the right direction, it still may be too sticky for policymakers to adopt a dovish pivot. Meanwhile, growth in the UK is stagnant, and the outlook is deteriorating ahead of the start of the increased tax burden on firms following October’s budget.

Markets are pricing in three interest rate cuts from the Bank of England this year.

A dovish-sounding Bank of England could pull the pound lower, boosting multinationals on the FTSE as they benefit from a more favorable exchange rate. Meanwhile, domestic firms of the FTSE may also get a helping hand higher the prospect of lower borrowing costs.

FTSE 100 forecast – technical analysis

FTSE has extended its recovery to record highs of 8695. Buyers, supported by the RSI above 50, will look to rise above 8700, and with blue skies above 88750 would be the next logical target.

Support can be seen at 8500, the weekly low, and 8480, the May 2024 high. Below here, 8400 comes into play, negating the near-term uptrend.

EUR/USD falls ahead of retail sales, US jobless claims

Eurozone retail sales are expected to fall -0.1% MoM
US jobless claims are forecast to rise to 213k from 207k
EUR/USD struggles below 1.04

EUR/USD is falling After two days of gains, dropping below 104 as a broad rebound in the US dollar weighs on the pair. Trade war fears have eased but worries regarding trade tariffs on the European Union continue to act as a headwind for the pair

Upbeat German factory orders have failed to boost the EUR. Factory orders jumped 6.9% month over Month in December, offering a glimmer of economic optimism and adding to gains of 2% in November. Recent German data has suggested that the downturn in the euro zone’s largest economy may be bottoming out.

Attention will now turn to eurozone retail sales, which are expected to fall 0.1% month on month after increasing 0.1% in November. Stronger-than-expected sales could contribute to a more optimistic outlook for the region, which is currently suffering stagnation in growth.

The ECB cut rates by 25 basis points to support the weakening economy.

Looking ahead to the afternoon, attention will be on US jobless claims and challenger job cuts. Jobless claims are expected to rise to 213k from 220k..

Other US data was mixed this week, with ADP payrolls stronger than expected, reinforcing strength in the labor market, but the SM services PMI felt 52.8, missing 54.2 expectations.

EUR/USD forecast - technical analysis

EUR/USD recovered from the brief spike from 1.02 and continues to trade is a neutral bias between 1.03 and 1.0450.

However, failure to rise above the 50 SMA could favor sellers. A break below 1.03 could see sellers gain momentum towards 1.02.

A bullish scenario would see buyers rise above the 50 SMA and 1.0450, creating a higher high and bringing 1.05 and 1.0530 into focus ahead of 1.06.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.