UK-EU Deal Lifts Sentiment Amid U.S. Credit Downgrade Concerns:

Image Source : Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went up around 0.78% on 20 May 2025.  

Macro Update: Bank of England Chief Economist Huw Pill signaled that the recent interest rate hold was likely a temporary pause rather than a shift in policy direction, cautioning that rate cuts had proceeded too rapidly amid persistent wage-driven inflation. The central bank had cut rates to 4.25% in a divided vote on May 8. Meanwhile, Vodafone projected a return to revenue growth in Germany, its largest market, after meeting its annual earnings target of €10.9 billion, adjusted for hyperinflation. In a major post-Brexit development, the UK and EU agreed on a broad reset of trade and defense ties, easing food export restrictions and formalizing a new fishing agreement. This geopolitical breakthrough helped lift London’s FTSE 100 to a seven-week high despite global market jitters following Moody’s downgrade of the U.S. sovereign credit rating. 

Top Market Movers: Among top gainers on FTSE 100 index, Diploma PLC (LSE: DPLM) witnessed a rise of 16.15% followed by Smiths Group PLC (LSE: SMIN) which gained around 4.28%. 

Commodity Update: The dollar remained range-bound Tuesday after a week of declines, pressured by the Fed’s cautious economic outlook and looming U.S. fiscal deficit concerns. Gold slipped 0.74% to $3,209.65, silver fell 0.48% to $32.35, and copper eased 0.37% to $9,487.05. Brent crude edged up 0.10% to $65.66 amid potential breakdowns in U.S.-Iran nuclear talks, dampening hopes for increased Iranian oil exports. 

Our Stance: Global market sentiment remains cautious as Moody’s downgraded the U.S. sovereign credit rating from “Aaa” to “Aa1,” citing the government’s ballooning $36 trillion debt burden and rising interest costs, casting a shadow over fiscal sustainability. While U.S. equities ended largely flat, investor confidence has been dented, and the dollar continued to weaken amid Fed caution and concerns over an impending fiscal deficit expansion tied to tax cut legislation. Although officials like Treasury Secretary Scott Bessent downplayed the downgrade’s relevance, the move highlights persistent structural risks. Meanwhile, oil prices steadied as geopolitical uncertainty in U.S.-Iran and Russia-Ukraine talks balanced out China’s softer economic outlook, keeping energy markets on edge. 

FTSE 100 : The FTSE 100 is trading near 8,740.28, up 0.47%, reflecting continued bullish momentum supported by strong market sentiment. The index remains comfortably above its 50-period Simple Moving Average, reinforcing a positive technical structure. A recent bullish candlestick pattern signals sustained buying interest, while the 14-period RSI at 67.25 highlights strong momentum, approaching overbought but not yet extreme. As long as support levels hold, the path of least resistance appears upward. A decisive breakout above the immediate resistance zone could open the door for further gains. Overall, the short-term outlook remains optimistic, with continued strength likely driving the index higher.​ 

FTSE 100 Technical Chart, Source - EODHD/Others