Ipek Ozkardeskaya
Swissquote Bank Ltd
The title of yesterday’s report was: will the Bank of England (BoE) cut? And the answer is yes, it is planning to cut its rates soon. This – expected and concretized dovish shift – was the major takeaway from the BoE’s latest MPC meeting that took place yesterday.
As a result, the FTSE 100 rallied to a fresh record yesterday and Cable sold off as a kneejerk reaction to the dovish shift in the BoE’s outlook, but rebounded strongly after the weekly jobless claims data from the US came in much stronger than expected.
Elsewhere, the S&P 500 rallied yesterday and closed from a spitting distance from an ATH level because the stronger-than-expected weekly jobless claims suggested a tighter labour market and an economic slowdown that could bring the Fed to cut rates if inflation eases. And if inflation eases not, well, it is still interpreted as a good news, because then, the demand is strong enough to push prices higher. Yes, equities are winners in both cases. But there is also the stagflation scenario - where the Fed will have no option but to keep rates at higher levels for a longer period of time, praying that the inflation fever will eventually break. And that – stagflation – is the major risk to the US equity rally ahead of next week’s US inflation update.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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