The pound extended its Tuesday’s gains and rose to a new year-to-date high after the U.K. released its strongest inflation print since August 2011. According to the Office for National Statistics, the Consumer Price Index (CPI) reached 2.9% in August, up from 2.6% the month before. The resurgent pound is weighing on British stocks and is pushing London’s benchmark FTSE index lower ahead of BOE’s rate decision on Thursday where the monetary authority is seen holding rates steady. Eyes will now turn on unemployment data to be release today which are expected to increase to 0.8K
On the technical part, the British FTSE fell significantly to close yesterday’s gap and is currently trading around the 7,330s. Since we saw a drop below the 7,350 support level, the FTSE is expected to continue to go lower. And if enough negative momentum is present, the index can break down and reach the 7,300 level underneath. However, the RSI reading is below 30 and is commonly interpreted as indicating an oversold or undervalued condition that may signal a trend change or corrective price reversal to the upside. The first level of resistance is seen at the 7,400-level followed by the 7,430.
Looking at corporate news, rising inflation and muted wage growth since Brexit has led many consumers to cut their spending. British home furnishings retailer Dunelm Group PLC reported a drop in sales and said that it expects British consumers’ disposable incomes to be under pressure. The outlook of the housing sector in the U.K. remains uncertain as Brexit talks were delayed until September 25. And as Barratt Developments and Berkeley Group have both already warned of a slow-down, investors will be watching the release of the full-year statement of house builder Galliford Try PLC for a better picture.
The best performers on the index are Micro Focus International PLC which rose 0.71% to trade at 2415. EasyJet PLC increased 0.67% to end at 1202 and Pearson PLC was up 0.51% to reach 590.
The worst performers are Tesco PLC which fell 1.62% to trade at 182.05. ITV PLC declined 1.49% to end at 158.70 and Diageo PLC declined by 1.45% ending at 2543.