Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

European indices rise as softer UK inflation points to potential BoE rate cuts

European indices rose overnight as softer UK inflation data increased the chances of further Bank of England rate cuts. The FTSE and DAX show mixed technical signals, with potential corrections ahead.

Adobe ftse Source: Adobe images
Adobe ftse Source: Adobe images

UK inflation cools, boosting rate cut prospects

European indices gained overnight, supported by softer-than-expected UK inflation data, which has boosted the chances of a follow-up Bank of England (BoE) interest rate cut.

Last night’s inflation report showed the annual rate of headline inflation in the UK rose by 2.2% in July, up from 2% year-on-year (YoY) in June but below forecasts of 2.3%. Notably, the core inflation rate for July fell to 3.3% YoY, marking its lowest level since September 2021. This followed a 3.5% increase over the prior two months.

BoE rate cut momentum builds despite strong jobs data

At the BoE meeting in August, the BoE cut rates by 25 basis points (bp) to 5.00% on a close 5-4 vote. The accompanying messaging from the BoE was cautious in terms of its forward guidance around the speed and timing of future rate cuts.

However, last night's cooler inflation numbers have increased the chance of back-to-back rate cuts from the BoE for the first time since the Global Financial Crisis. There are now 10 bp of rate cuts priced for its 19 September meeting and a cumulative 48 bp of rate cuts priced before year-end.

This is despite robust jobs data released earlier in the week, which showed the unemployment rate fell to 4.2% from April to June 2024, down from a two-and-a-half-year high of 4.4% in the previous period and below market forecasts of 4.5%.

FTSE technical analysis

After peaking at the mid-May high of 8474, the Financial Times Stock Exchange (FTSE) spent the better part of the past two months range-trading between 8300 and 8100 before last week's flush below 8000 to the 7915 low.

The FTSE’s swift rebound from the 7915 low and its return to its former range indicates that the sell-off to the 7915 low was part of a correction within an uptrend rather than the start of a new impulsive move lower.

Although we lack firm evidence that the correction is complete, we are willing to move to a weak positive bias, leaning against the support coming from last week’s 7915 low and the 200-day moving average at 7878.

FTSE daily chart

FTSE daily chart Source: TradingView
FTSE daily chart Source: TradingView

DAX technical analysis

In the lead-up to the August sell-down, we held the view that the DAX had completed an Elliott Wave five rally from the October 14,630 low to the mid-May 18,892 high and had commenced a correction.

The dip to the 17,024 low last week was viewed as part of a correction within an uptrend. However, a sustained break above resistance at 18,000/18,100 is needed to increase confidence that the correction is complete and that the uptrend has resumed.

A break below 17,000 would warn that a deeper decline back towards 16,000 is underway.

DAX daily chart

DAX daily chart Source: TradingView
DAX daily chart Source: TradingView
  • Source: TradingView. The figures stated are as of 15 August 2024. 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.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 40
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Tuesday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.