FTSE – steady after trade tensions send FTSE reeling

The FTSE has steadied on Wednesday, after suffering huge losses on Tuesday. In the North American session, the pair is at 7,271, up 0.15% on the day. There are no major events in the U.K. on the schedule.

It has been a rough week for the FTSE, which has declined 1.6%. The escalation in trade tensions between the U.S. and China has dampened risk appetite, after President Trump’s threat to slap heavy tariffs on China sent shock waves through global equity markets. Chinese officials has said they would cancel the talks, but this turned out to be an empty threat, as Chinese Vice Premier Liu He is leading a Chinese delegation to Washington. Treasury Secretary Steve Munchin has said that the tariffs, which are set to take effect on Friday, could be cancelled when the talks resume. Still, it’s unclear if the sides are really close to a deal, despite assurances from U.S. officials that substantial progress has been made in the talks. If there are signs that a deal is close at hand, risk appetite will jump and the FTSE could quickly erase this week’s nasty slide.

The Bank of England has sent out a message of a bias towards tightening rates, but is anybody listening? Last week BoE Governor Mark Carney that current markets expectations of future rate hikes were too modest. This hawkish stance failed to catch the attention of investors and the pound didn’t jump at the BoE’s command. Instead, GDP/USD has declined 1.25% so far this week and is testing the symbolic 1.30 level. The BoE has raised its forecast for U.K growth to 1.5%, up from the previous forecast of 1.2% and inflation is hovering close to the BoE’s target of 2.0%. With these healthy numbers, investors are not expecting rate hikes anytime soon, especially with the lingering uncertainty over Brexit.

Kiwi tumbles as RBNZ cuts rates

Tariff-geddon taxes global markets

Economic Calendar

Wednesday (May 8)

  • 3:30 British Halifax HPI. Estimate 0.3%. Actual 1.1%
  • 4:15 British MPC Member Ramsden Speaks

*All release times are DST

*Key events are in bold

FTSE, Wednesday, May 8 at 11:50 DST

Previous Close: 7,260 Open: 7,238 High: 7,222 Low: 7,278 Close: 7,271

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.