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FTSE 100 Forecast Ahead of the Bank of England Rate Decision

FTSE 100 Forecast Ahead of the Bank of England Rate Decision

2020-05-05 17:05:00
Peter Hanks, Analyst
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FTSE 100 Price Outlook:

  • The FTSE 100 has lagged other equity markets in recent months but stands relatively flat so far this month
  • Until the upcoming rate decision from the Bank of England has passed, the index may remain trendless
  • Find your trading style to see if recent FTSE 100 price action fits in your wheelhouse

FTSE 100 Forecast Ahead of Bank of England Rate Decision

After a brief trip lower to start the month, the FTSE 100 has scampered higher to stand effectively flat for the first few trading days in May. Despite its lukewarm performance in recent weeks, the index has become a laggard compared to other major global equity markets and with an upcoming rate decision from the Bank of England, may remain trendless until the event risk has passed. Further still, there is little guarantee the FTSE 100 will continue higher following the decision as no change in the interest rate is expected and it is not clear what supplementary easing measures the bank will explore – if any.

FTSE 100 Price Chart: 4 – Hour Time Frame (February – May)

FTSE price chart

That being said, the FTSE is far from a position of power despite early signs that European and American cities have begun to ease restrictions. Therefore, one of the few bright spots for the index may exist in the series of higher highs and higher lows starting in late March and holding above the recent low around 5,670 will be crucial in keeping the formation alive.

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While the upcoming event risk may provide the spark to make or break the level, evidence for a broader continuation higher might exist even if the immediate reaction to the news is negative – as long as it holds above the recent low. Should it fail however, the FTSE 100 may slip to an area of subsequent support around 5,500. This would muddy the series of successive higher highs and lows and would deal a technical blow in the short-term.

If, on the other hand, the event risk passes and market participants are happy with the bank’s intentions, establishing another high above resistance around 6,225 will be important for staging the next leg higher. A gap exists immediately above the area, which may allow for bulls to capture the zone and enjoy a quick rush higher. Either way, price action may remain subdued until Thursday’s rate decision has passed. Join my colleague Justin McQueen for a live webinar of the event in which the resultant price action and implications will be discussed. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

--Written by Peter Hanks, Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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