FTSE 100 Outlook: Nearing Key Pivot Ahead of FOMC Decision

[MongiIG]

Jul 27, 2022 | DailyFX
Richard Snow, Analyst

FTSE 100 ANALYSIS AND TALKING POINTS

• Chair Powell’s Press Takes Centre Stage With Fed Expected to Hike 75bps
• FTSE 100 Nears Key Pivot

FTSE 100: Today’s focus for traders will be firmly on the Federal Reserve rate decision and more specifically Fed Chair Powell’s press conference. Heading into the meeting the expectation is for the Fed to deliver a back-to-back 75bps rate hike, taking the Fed Funds Rate to the previous cycle high. However, it will be Chair Powell’s comments regarding the rate outlook that will be the key driver for markets and given the recent slowdown in economic activity there is a growing sense that the Fed could soften its tone. In my view, I still see the Fed sticking to its aggressive hawkish stance, particularly as headline CPI has yet to have peaked. As we have seen previously with the Fed still doing QE back in March, the Fed can be slow to pivot and thus with Fed Officials laser-focused on lagging inflation data, this will remain the case. As such, even if the Fed Chair backs away from a 100bps consideration can prompt a bid in equities, as seen at the last two meetings, gains have often been short-lived.