FTSE 100 Holds Firm as Rate Cut Hopes Build

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, was trading rose around 0.44% on 02 January 2026. 

Macro Update: In 2026, the UK economy faces sluggish 1.3% GDP growth and a 5.1% unemployment rate. However, optimism remains as inflation cools toward the 2% target, allowing the Bank of England to maintain a gradual rate-cutting cycle. Following a record-breaking FTSE 100 performance, fiscal focus shifts toward managing high public debt. 

Top Market Movers: Among top gainers on FTSE 100 index, Rolls Royce Holdings PLC (LSE: RR.) witnessed a rise of 3.44% followed by Babcock International Group PLC (LSE: RTO) which gained around 2.66%. 

Commodity Update: The U.S. dollar began 2026 on a weak footing after underperforming most major currencies last year, while the yen steadied near 10-month lows as markets awaited key economic data to assess interest-rate trajectories. Gold rose 0.71% to USD 4,371.90, silver gained 2.22% to USD 72.165, and copper increased 0.51% to USD 12,528.75. Brent crude edged up 0.26% to USD 61.07, as investors balanced fresh geopolitical risks against expectations that OPEC+ will maintain its current supply policy. 

Our Stance: Our stance is cautiously constructive. While 2026 growth remains sluggish at ~1.2%, cooling inflation toward the 2% target provides critical room for Bank of England rate cuts. Despite fiscal tightening and a loose labor market, the FTSE 100’s record performance signals resilient corporate health and attractive valuations. 

FTSE 100: In its latest session, the FTSE 100 Index gained 20.00 points to close at 9,961.00, forming a small bullish candlestick. The broader technical outlook remains constructive. On the daily chart, the index continues to trade above its 50-period Simple Moving Average (SMA), which serves as a key dynamic support and reinforces the prevailing short-term bullish trend. A notable support zone is positioned near 9,860, and maintaining price action above this level will be critical for sustaining the ongoing uptrend. On the upside, a decisive breakout above immediate resistance levels would provide strong bullish confirmation, potentially triggering fresh upward momentum and further improving investor sentiment. From a broader perspective, the index also remains above its 21-period SMA on the weekly chart, underscoring the resilience of its longer-term bullish structure despite recent short-term fluctuations. 

Source - EODHD/Others