FTSE 100 Higher On Reopening Optimism

FTSE 100 trades higher by midday on coronavirus lockdown ease hopes and better data from China. Chinese exports rise by 3.5% in April compared with the same month last year, beating the expectations of -14.1%. On the other hand, China Services PMI came in at 44.4, well below the forecasts of 51 in April.

Bank of England Keeps QE Unchanged

Earlier today the Bank of England in a teleconference policy meeting kept the interest rates unchanged at 0.10% but mostly surprised markets keeping also the QE unchanged

Two MPC members Jonathan Haskell and Michael Saunders voted to increase the QE package by 100 billion beyond the £645bn of asset purchases for the economy.  

Bank of England sees UK GDP falling 14% in 2020 and 25% decline in the Q2, and jobless rate hitting 8%. The scenario for the interest rates is for 0.10% through 2021. BOE also expects the GDP to reach its pre-coronavirus crisis levels in the Q2 of 2021 and growing by 3% in 2022.

Andrew Bailey, the Bank of England governor, said: “The UK economy and financial system are robust to a period of social distancing that extends through the summer and is phased out by September and to a number of sensitivities either side of that.”

I think that the central bank will increase the QE in the upcoming policy meeting as the risk for the economy tilted to the downside as the coronavirus lockdown persists. In the interest rates, the central bank has entered a wait and see stance. 

On Brexit talks, EU Trade Commissioner Phil Hogan said that the European Union and the United Kingdom are making slow progress on Brexit talks. 

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FTSE 100 Support and Resistance

FTSE 100 is 0.71% higher at 5,895 as the rebound from the March lows returns to life above the 50-day moving average. The technical outlook is improving for the short term above the 50-day moving average, but the longer-term technical picture remains bearish. 

On the upside, first resistance for FTSE index stands at 5,907 the daily top. The next resistance for the FTSE is at 6,154 the high from April 30. If FTSE breaks above 6,154, the next supply zone will be met at 6,457 the high from March 9. 

On the flip side, initial support for the FTSE stands at 5,853 the daily low. If the index breaks lower, the next support area is at 5,808 the 50-day moving average. More support for the FTSE index would be met at 5,706 the low from May 4.

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