Powell Stresses Economic Strength Amid Uncertainty Over Tariffs and Inflation:

Image Source : Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went up around 0.02% on 12 February 2025.  

Macro Update:  Britain is expected to experience solid economic growth and declining inflation in 2025, but the Bank of England has limited room for further interest rate cuts, according to the NIESR think tank. Finance Minister Rachel Reeves is projected to remain within fiscal rules, though concerns about long-term debt persist. Meanwhile, Shell forecasts strong global demand for liquefied natural gas in the coming years, with oil demand potentially peaking early next decade. In the housing market, Barratt Redrow anticipates annual earnings at the higher end of expectations, supported by steady bookings and a £100 million share buyback, though expiring tax incentives may temporarily boost demand. Additionally, Close Brothers has set aside up to £165 million to cover motor finance claims following a ruling on unlawful commissions. 

Top Market Movers: Among top gainers on FTSE 100 index, Prudential PLC (LSE: PRU) witnessed a rise of 8.76% followed by Barratt Redrow PLC (LSE: BTRW) which gained around 4.44%. 

Commodity Update: On Wednesday, the dollar retreated from its tariff-driven rally, dropping below recent highs as traders awaited U.S. inflation data and updates on the trade front. Federal Reserve Chair Jerome Powell maintained that the Fed was not in a rush to cut interest rates during his testimony to Congress. Commodities had mixed performances: gold fell by 0.51% to $2917.40, silver slipped 0.11% to $32.28, while copper rose 0.14% to $9,374.70. Brent oil dropped 0.47% to $76.64, impacted by a rise in U.S. crude stockpiles and ongoing tariff concerns. Investors are focusing on the upcoming CPI report for insights into future rate decisions. 

Our Stance: Federal Reserve Chair Jerome Powell, in his recent testimony before Congress, emphasized the strength of the U.S. economy, highlighting low unemployment and inflation slightly above the Fed's 2% target. He indicated that there is no immediate need to cut interest rates further, cautioning that reducing policy restraint too quickly could hinder progress on inflation. Powell also addressed the potential economic impacts of President Donald Trump's proposed tariffs, acknowledging that while free trade has its merits, the Fed's role is to respond to how trade policies affect the economy rather than comment on them directly. He reassured Americans about the safety of their bank accounts, even as the administration moves to dismantle the Consumer Financial Protection Bureau. Market reactions to Powell's testimony were mixed, with slight declines in the S&P 500, a tick up in the 10-year Treasury note yield, and minor losses in the dollar index. Investors remain cautious ahead of upcoming U.S. inflation data, which could influence the Fed's future policy decisions. 

FTSE 100 

The FTSE 100 finished at 8,777.39 on Tuesday, gain by 0.11%, and formed a bullish candlestick pattern, signalling positive market sentiment. The index remains above its 21-period Simple Moving Average (SMA), suggesting a favourable short-term outlook. Furthermore, the 50-period SMA provides solid support, reinforcing the potential for continued upward momentum. With the Relative Strength Index (RSI) at 71.53, the index shows healthy bullish strength without reaching overbought levels, indicating there is still room for further gains. These technical indicators indicate a positive trend, suggesting that the FTSE 100 is poised for further growth. As such, the index remains an appealing option for short-term investors seeking potential opportunities. On the weekly chart, the FTSE 100 gained 0.31%, closing at 8,700.53. The index remains well above the 50-period SMA at 8,186.40, with support at 8,206.78. Resistance is at 8,800, and a breakout above this level could push the index toward 8,900. However, a drop below 8,020 could signal downside risk. Investors should monitor these levels for insight into future price movements. 

Data Source - Refinitiv