FTSE Breaking Out

The FTSE is breaking higher today on the back of the latest UK economic data released this morning. The ONS reported that in the three months to January, UK wage growth slowed to 5.6% from 5.8% prior, this marks the lowest level of earnings increases since October 2022. Additionally, the unemployment rate was seen creeping up to 3.9% from 3.8% prior while the claimant count (number of people claiming unemployment assistance) rose to 16.8k from the prior reading of 3k.

BOE Easing Expectations

In all, the data was seen as bearish for GBP, putting fresh focus on BOE easing expectations. Recent improvements in the UK economic outlook had seen traders pushing out rate-cut projections to August. However, in light of today’s data, these projections look vulnerable to a shift forward, particularly if we see any softening in upcoming inflation data. With GBP coming off and the prospect of UK rate cuts in the coming months, FTSE has seen a wave of demand today and looks likely to remain supported near-term while this narrative holds.

Bailey Speaking Later

Looking ahead, traders are awaiting comment from BOE governor Bailey who speaks later today. Worth pointing out that given the drop in inflation recently, real wages were still higher in today’s data and, as such, unlikely to fuel much of a change in outlook from the BOE. However, any reference at all to expected easing this year is likely to keep FTSE supported for now.

Technical Views

FTSE

The rally in the index has seen price breaking back above the 7678.8 level, while still within the broader bull channel which has framed price action over the last 7 months. Focus is now on a test of the 7811 level. This will be a big challenge for bulls with a break here seen opening the way for a move up to 8023.5 next.