FTSE holds gains post BoE

The FTSE led the charge higher in Europe as investors cheered a more dovish sounding BoE. As expected the Bank of England kept rates on hold in an unanimous vote. However, the central bank struck a more dovish tone, indicating that it’s next move could be a rate cut rather than a hike. Up until now the BoE had retained a hawkish bias; today that was replaced with a slightly more dovish stance as the UK central bank joins the other central banks around the globe with a more cautious outlook.

The BoE highlighted concerns over low levels of inflation and policy makers were concerned that a cut may be needed to prevent inflation tumbling lower. The BoE still believes that a smooth Brexit is the most likely outcome; in this scenario a rate hike may still be necessary. However, the central bank, for the first time, also homed in on a third possibility – continued Brexit and political uncertainty. This scenario, which is currently looking like the most probable outcome, as Boris Johnson battles Brexit out with Parliament and the Courts, would most likely reduce inflationary pressures. In short if we carry on how we are in terms of Brexit uncertainty, then a rate cut would be required.

Following the dovish tone from the BoE, the FTSE has continued to pace higher. There is nothing like the prospect of cheap money to get equities moving! Oil was also giving the UK index a boost. Brent traded over 1.5% higher as tensions flared up again in the middle east; oil majors are tracing the black gold higher.

Share: Analysis feed

CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed