Lloyds helps drive FTSE gains

A hawkish BoE stance could be derailed given the flexibility around the Brexit process. Meanwhile, Lloyds earnings point towards a bright future given rising rates.

• FTSE trades higher amid inflation report hearings
• Lloyds jumps after strong profitability after return to private hands
• FOMC minutes set to shift attention onto US

The FTSE 100 is enjoying a strong finish to a largely positive session, with the index riding out a late rebound for the pound. With a morning’s worth of disappointing eurozone PMI surveys, we have seen Carney’s inflation report testimony drag EURGBP lower despite today’s jump in UK unemployment. While Carney’s expectation of three rate rises over the next three years will grab the headlines, the fact that the bank aims to be ‘nimble’ given Brexit uncertainty points towards a strong chance we may never see all three hikes materialise should a preferential deal not be achieved.

Lloyds is grabbing the attention of the markets today, as the UK bank pushes onwards and upwards in its first year as a private bank post-crisis. Question-marks over whether the government’s stake would hold the firm back have been firmly answered, with the bank posting the highest pre-tax profit since 2006. With the Bank of England pointing towards three rate hikes in the coming years, there is reason to believe that Lloyds will emerge as one of the main investment plays to take advantage of that shift given their recent re-emergence into fully private hands.

With today’s focus heavily centred upon European economic and central bank affairs, markets now turn their mind to US monetary considerations given the impending FOMC minutes. Coming at a time where economic growth and tax-cut fuelled wage jumps are pushing inflation expectations higher, markets will be keeping a keen eye out for a signal of just how tolerant members will be should inflation continue to rise.