Fed Holds Rates, Trump Pushes for Cuts Amid Tariff-Driven Growth Slowdown:

Image Source : Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went down around 0.03% on 20 March 2025.  

Macro Update:  The Bank of England is expected to keep interest rates steady as it assesses economic risks from U.S. trade tariffs and the UK's upcoming employer tax hike. Despite inflation remaining above the 2% target, the BoE has been slower to cut borrowing costs compared to the ECB and Fed, contributing to sluggish growth. Wage growth remained stable, with private sector pay rising by 6.1% year-over-year, slightly below the previous 6.2%. Meanwhile, the UK pharmaceutical industry criticized a government levy on drug costs, warning it could deter investment. Finance Minister Rachel Reeves is set to announce a £9.9 billion fiscal buffer aimed at maintaining spending discipline. In markets, homebuilder Crest Nicholson reported improved sales but flagged economic uncertainties, while the FTSE 100 remained flat as investors awaited the Fed’s interest rate decision. Energy stocks outperformed, driven by higher oil prices amid hopes of rising U.S. fuel demand and a potential ceasefire between Ukraine and Russia. 

Top Market Movers: Among top gainers on FTSE 100 index, Experian PLC (LSE: EXPN) witnessed a rise of 3.07% followed by Bunzl PLC (LSE: BNZL) which gained around 2.29%. 

Commodity Update: The dollar weakened on Thursday after the Federal Reserve signalled potential interest rate cuts later this year, despite concerns over U.S. tariffs. Fed policymakers forecasted two quarter-point rate cuts in 2025, maintaining their outlook from three months ago, even as they anticipate slower economic growth and higher inflation. On Wednesday, the Fed kept its benchmark interest rate steady at 4.25%-4.50%. In commodities, gold rose 0.52% to $3,057, marking a new lifetime high, while silver surged 0.72% to $34.45, and copper increased 0.48% to $10,029.50. Brent crude also gained 0.57% to $71.18, driven by a decline in U.S. fuel inventories and escalating Middle East tensions. 

Our Stance: The Federal Reserve maintained its benchmark interest rate at 4.25%-4.50% while forecasting two quarter-point cuts later this year amid concerns over slower economic growth and higher inflation, which Fed Chair Jerome Powell partly attributed to the Trump administration’s extensive tariffs. Trump, in response, urged the Fed to cut rates more aggressively, arguing that tariffs would soon ease their impact. U.S. stocks rallied after the Fed’s decision, and Asia markets followed suit, though gains were tempered by weakness in Chinese equities. Trump's economic policies, particularly tariffs, have also fueled discussions about a shift in the global economic order, with some Asian nations looking to reduce dependence on the U.S., though implementing such a shift remains challenging. While Trump's approach may aim to bolster domestic industries, it introduces economic uncertainties, potentially disrupting global trade dynamics and challenging the post-World War II multilateral framework. The effectiveness of these policies remains debatable, as they risk short-term inflationary pressures and long-term geopolitical realignments. 

FTSE 100 

The FTSE 100 is currently trading at 8,712.88, reflecting a modest increase of 0.07% on Thursday, forming a bullish candlestick pattern. The index is positioned above both the 21-period and 50-period Simple Moving Averages (SMAs), indicating strong support levels. This technical setup suggests potential for further upward momentum in the near term. Holding above a key horizontal support level, the index shows signs of shifting towards a more bullish sentiment after recent lows. The Relative Strength Index (RSI) stands at 55.16, signalling moderate bullishness with room for more upside. While market uncertainty remains, short-term traders could find opportunities near support levels, with momentum shifts determining whether the recovery continues or a decline resumes. The next few sessions will be critical to confirm whether the bullish outlook holds or a downward trend reasserts itself. 

Data Source - EODHD/Others