FTSE probes top of recent range

There’s been a small move higher for the FTSE 100 in early trade, with the benchmark once more probing the upper reaches of its recent range around 7710-7740. Several attempts to breach this resistance in the past 3 weeks have been met with resistance and it will be interesting to see whether it can be defended by sellers once more. The pound is also edging higher, with the largest gains seen against the Japanese Yen after the latest Bank of Japan (BoJ) chose to stand pat at their latest policy meeting, disappointing those calling for a move towards a tighter stance.

BoJ decide to “counter speculation”

The global push towards a tightening of monetary policy, was dealt a setback in the early hours of this morning when the BoJ decided against a more hawkish stance despite a fair amount of speculation that they would. The bank has been forced to intervene in the government bond markets 3 times in the past week to prevent yields rising above their target, and this had led to calls that they would take this week’s meeting as an opportunity to take the first steps away from its ultra-accommodative policy stance - however, they did not. Governor Kuroda even chose to address the speculation directly, saying this message would “fully counter” the speculation in what was a clear attempt to shift market expectations for the future path of policy lower.  

Eurozone inflation highest since 2012 but growth figures disappoint

The most recent data from the Eurozone has provided mixed messages for the Euro with inflation moving higher but growth dipping. The flash estimate CPI increased by 2.1% in year-on-year terms, marginally more than the 2.0% expected and in doing so, marked the first time since 2012 this metric has exceeded the 2.0% level. Having said that, a fair chunk of this rise appears to be down to a higher oil price, with the core reading - which strips out volatile aspects such as the price of oil - coming in at just 1.1% and remaining well below the ECB’s mandate. At the same time we also got the latest look at growth figures and there was some mild disappointment on this front with the Euro area GDP indicated to have grown by 0.3% in the second quarter, slightly below forecasts and also marking the slowest pace of growth since Q3 2016. The Euro has moved back above 1.17 against the US dollar this morning, recouping the losses seen following last week’s ECB meeting as the pair remains in a longer term consolidation phase following the declines seen in April and May.        

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