Footsie Rebounds from Hawkish BOE Amid Trade Optimism

The UK stock market has rebounded from the hawkish surprise of the BOE’s meeting, as positive developments on the trade front fuel an economy showing signs of recovery.

Bad News is Now Good News

UK markets have found reasons for cautious optimism lately, despite. However, the central bank's actions signalled greater concern about economic growth than inflation, and moving towards easing could support stocks and the broader economy. A strong GDP report on Thursday might raise concerns about delayed easing and weigh on equities.

during the first quarter. Even if the upcoming GDP figures come in stronger than analysts estimate, the market might preserve its confidence in the prospect of additional easing – sluggish economic activity typically translates into reduced inflationary pressures. The outlook in the UK remains subdued overall, which may provide scope for further easing by the BOE. A few strong growth figures early in the year, due to favourable weather conditions, could be offset by slower growth later if tariffs start to bite into the economy.

UK Growth Expected to Stagnate

The UK economy is expected to have expanded at a 0.6% rate in the first quarter, an acceleration from the 0.1% recorded in the final three months of 2024. However, the annual growth rate is projected to decline to 1.2% from 1.5% as the particularly strong Q1 of 2024 rolls off. Another concerning sign could emerge in the monthly figure, which is expected to stagnate at 0.0% in March after the unexpected 0.5% rise seen in February. This aligns with the BOE's assessment published last week, showing that since mid-2024 and that the labour market is loosening.

While further stimulus from the BOE is beneficial for stocks, the FTSE's global exposure means traders might focus more on the trade situation than on UK growth prospects. So far,, which have cheered markets, but the underlying details suggest some worrying patterns. Both agreements have left the 10% "base" tariffs in place, potentially implying increased friction in global trade. The FTSE has virtually recovered from the crash following the tariff announcements, but whether it can make further headway beyond that will likely depend on the nature of trade deals announced in the coming weeks.

Footsie H&S Breakdown Reversed

The Footsie completed the bearish correction of a completed head-and-shoulders (H&S) pattern on its way down near 7500, suggesting a failed dead-cat-bounce (DCB) and a full V-shaped recovery above the 8460 neckline. If bulls can maintain support, prices could accelerate towards the record high of 8910 through the 8750 right-shoulder peak. However, sliding under 8390 might open the door to the 8000 handle should the 8150 support give way to bearish price action.

Source: SpreadEX / UK100

Key Takeaways

The UK stock market has regained its footing due to prospects of easing from an economic slowdown and optimism surrounding recent trade agreements, with lacklustre economic data suggesting continued support for the economy. Yet, the fate of the FTSE hinges on the nature of future trade deals, as global trade tensions appear to impact the index more than the economy does.