22nd March 2019
European leaders moved to stop a chaotic no-deal Brexit happening next week, handing the U.K. an extra two weeks. The U.K. now needs to decide by April 12 what it will do next. If the Prime Minister fails to get Parliament’s backing for her Brexit deal in a third “meaningful vote”, she will have until April 12 to decide whether to seek a further extension or leave with no deal. Even if Mrs May asks for an extension beyond April 12, the EU could refuse, after Emmanuel Macron warned that a third defeat for the Brexit deal would mean “going to a no-deal”. If Parliament backs Mrs May’s deal next week, Britain will leave the EU on May 22.
The dovish tone from the central bank and sterling’s latest slide helped the FTSE 100 resume its recent surge. The index advanced 64.3 points to 7,355.31, a five-month high, as the pound continued to plunge on deepening no-deal Brexit worries.
Bank of England revealed that the economy is accelerating ahead of the UK’s scheduled departure from the EU. The Bank’s survey of businesses found that around two thirds were now implementing contingency plans for a disorderly departure and 40pc have started to stockpile. Its policymakers voted unanimously to leave interest rates unchanged at 0.75pc in their final meeting before March 29. The Monetary Policy Committee now expects growth to pick-up to 0.3pc in the first quarter of the year, compared to its February forecast of 0.2pc.
Although business investment is being hampered by the mounting uncertainty, consumer spending is recovering as real wages climb, its rate-setters revealed. The Bank said that many companies also reported that there were “limits to the degree of readiness that was feasible in the face of the range of possible outcomes in that scenario”. Possible issues cited by businesses included tariffs, currency movements and border frictions.
Europe
A strong performance from the mining, energy, consumer and healthcare sectors ensured the FTSE 100 outperformed yesterday. The announcement from the US central bank weighed on investor sentiment initially, but traders shrugged-off the growth downgrade, and focused on the Fed’s hint that rates won’t be hiked in the foreseeable future.
US
The S&P climbed strongly from the 2808 level (just missing the 2805 long order unfortunately) as traders latched onto the dovish update from the Fed. It would appear that policy makers are content to sit on their hands for the time being, and that has boosted investment sentiment.
FTSE 100 Trading Signals, Forecast and Prediction
The FTSE didn’t quite manage the 7378 resistance level yesterday as we managed 7370 before dropping off after the bell. The bulls did however manage to break 7340, but overnight weakness has brought us back below this level. As such, we are looking at support at 7300 now, and this is an area that may well hold an early test this morning as we have the 200ema and the fib level here. If it does hold then the bulls will be keen to recapture ground above the 7340 again, to retest the 7370, and possibly 7385. The 2 hour chart has gone bearish after the overnight weakness and is showing resistance at 7356 to start with this morning however, so we may well see a stutter here. That tallies with a gap close as well, as yesterdays close was 7355. Gap close, drop and then rise today maybe as the plan.
Whilst currently green, the 30min coral is at 7347 and will probably go red if we remain below this level, again showing this level as a resistance level.
Below the 7295 fib level then support is at 7250 and then 7200 below that as the main levels. 7170 is the 200ema on the daily chart and a possible bounce point if weakness creeps back in. Yesterday saw a bit of a delayed reaction from the Fed’s dovish tone on Wednesday with the US rising strongly, and the SP managing a high of 2860. With 2 hour support at 2840 the trend still remains bullish on the S&P and Wednesday’s drop on the news looks false.
For the FTSE, above the 7386 level then we are looking at the round number of 7400 mooted earlier this week, with the top of the Raff channels at 7427 and 7454 above that. If the bulls remain in the driving seat and the Brexit delay helps to stabilise the chaos in Westminster we may push even higher in the short term.
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