FTSE climbs as Federal Reserve hints at rate cut

The FTSE has posted considerable gains on Thursday. Currently, the FTSE index is trading at 7,265, up 0.60% on the day. On the release front, there are no British data events. BoE Governor spoke at an event in Tokyo. In the U.S., unemployment claims rose to 218 thousand, above the estimate of 215 thousand. On Friday, the U.S. releases nonfarm payrolls and wage growth.

Is the Federal Reserve on its way to lowering rates for the first time in 2019? Since raising rates back in December, the Federal Reserve has sounded neutral with regard to rate movement. However, the Fed made a dramatic U-turn this week, with Fed Chair Jerome Powell hinting at a rate cut. On Tuesday, Powell said that the Fed would “act as appropriate to sustain the expansion”. It was also noteworthy that Powell did not mention his “patient” approach to monetary policy, which has been a buzzword in his recent comments. Earlier in the week, St. Louis Fed president James Bullard also discussed the need to lower rates in order to stabilize the economy. Bullard said that the Fed might have to cut rates due to low inflation and the ongoing trade war with China.

The British economy is showing signs of weakness, as PMIs, which are gauges of key sectors of the economy, were soft in May. The manufacturing and services PMIs missed their estimates and came in at 48.6 and 49.4, which indicates contraction. The services PMI was slightly better, with a reading of 51.0. Still, the blue-chip FTSE has rebounded after a dismal month of May, when the index fell 3.6%. The FTSE has clawed back in June, with gains of 1.5%.

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Economic Calendar

Thursday (June 6)

• BoE Governor Carney Speaks

Friday (June 7)

• 8:30 US Average Hourly Earnings. Actual 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 180K
• 8:30 US Unemployment Rate. Estimate 3.6%

*All release times are DST

*Key events are in bold

FTSE, Thursday, June 6 at 10:00 DST

Previous Close: 7,220 Open: 7,230 High: 7,226 Low: 7,276 Close: 7,265

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