UK economic activity shows surprising resilience despite sticky inflation

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, was trading rose around 0.10% on 23 January 2026. 

Macro Update: Recent PMI data show UK businesses expanding at the fastest pace in nearly a year, led by services and manufacturing growth, and export orders increasing for the first time in almost four years—signs of broadening economic momentum heading into 2026. At the same time, official statistics indicate a notable drop in government borrowing in December, with tax receipts hitting record highs, easing pressure on public finances even as overall debt remains elevated. Retail sales surprised on the upside in December, marking the first monthly increase since September and lifting consumer sentiment somewhat, though quarterly sales figures still reflect underlying weakness. 

Top Market Movers: Among top gainers on FTSE 100 index, Bae Systems (LSE: BA.) witnessed a rise of 1.86% followed by BP PLC (LSE: BP.) which gained around 1.69%. 

Commodity Update: The U.S. dollar was on track for its biggest weekly fall in a year after comments and reversals by Donald Trump unsettled investors. The Japanese yen traded near one-week lows ahead of the Bank of Japan policy decision. Gold rose 1.14% to USD 4,963.60, silver climbed 2.81% to USD 99.05, and copper gained 1.19% to USD 12,929.00. Brent crude slipped 1.80% to USD 64.06 as geopolitical concerns eased.  

Our Stance: Inflation remains above the Bank of England’s 2 per cent target, with recent data pointing to a modest uptick that could complicate the central bank’s policy path. Consumer confidence continues to lag, marking a decade without a positive reading despite slight monthly improvements, underscoring persistent caution among households even as some sectors of the economy show resilience. These mixed signals highlight the delicate balance policymakers face between supporting growth and containing inflationary pressures. 

FTSE 100: The FTSE 100 gained 21.82 points to trade at 10,171.87, continuing to hold above the key support zone near 9,800 and maintaining a stable broader structure. The 21-day and 50-day Simple Moving Averages remain positioned below current levels, providing underlying support and leaving scope for near-term consolidation. Momentum is improving, as reflected by a strengthening RSI. Immediate support is placed around 8,950, while upside resistance is seen near 10,250 and 10,400. 

Source: Charts by REFENITIV