The BoE and Fed signal unlikelihood of further rate hikes

Last week's unchanged decision by the Bank of England (BoE) to keep rates on hold was lost a little in the noise of the FOMC meeting. However, for those who missed it, the accompanying message from both the BoE and the Fed was similar in that further rate hikes are unlikely.

At its meeting, the BoE noted that higher rates were working to reduce inflation after raising interest rates from 0.1% to 5.25%. After inflation peaked at an eye-popping 11% in 2022, the BoE expects inflation to fall to 4.5% by the end of the year before extending its decline towards the bank's 2% target next year.

The UK's Q3 GDP data

Higher interest rates are also expected to weigh on activity data. The BoE expects GDP to be broadly flat into the first half of next year and broadly flat in the medium term, "also reflecting a waning boost from fiscal policy and subdued supply growth.

This means that while this Friday's Q3 UK GDP release will be soft and undoubtedly create headlines, it won't be unexpected. For the record, September's GDP is expected to print at 0%, falling from 0.2% in August. Q3 GDP growth is expected to contract by -0.1% from 0.2% in Q2.

FTSE technical analysis

The FTSE continues to trade sideways above horizontal support at 7200 and below downtrend resistance at 7680ish, coming from the February 8047 high as well as the 200-day moving average at 7622.

If the FTSE can see a sustained break above the resistance layers mentioned above, it would set up a retest of the Feb 8047 high. Aware that until this occurs, further range trading is likely, including a possible retest of range lows at 7200.

FTSE daily chart

DAX technical analysis

In our last update in mid-October here, we said we believed the correction in the DAX from the July 16,615 high was close to completion. However, to confirm this, "a sustained close above the 200-day moving average at 15,725 is required."

The DAX topped out at 15,684 before making a fresh pullback low at 14,666, which leaves the DAX with some considerable wood to chop to confirm the correction is complete.

The first resistance level that needs to be conquered is the broken uptrend support, now resistance at 15,375, coming from a October 2022 low of 11,829. It would then require a break above the downtrend resistance currently at 15,650, coming from the July 16,615 high. Finally, it must conquer a layer of resistance at 15,680/720ish from the mid-October high and the 200-day moving average now at 15,720.

DAX daily chart

• _{Source Tradingview. The figures stated are as of 6 November 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}