FTSE 100, USD/JPY Forecast: Two trades to watch

FTSE 100 rises ahead of BoE  rate decision

• UK wage growth cooled
• BoE is expected to leave rates at 4.5%
• FTSE 100 extends its recovery from the 8460 swing low

The FTSE 100 is heading higher, as data showed wage growth slowing ahead of the Bank of England's rate decision.

Labour market data from the Office of National Statistics showed that unemployment held steady at 4.4%, in line with expectations, while wage growth, including bonuses, was 5.8%, as expected.

Policymakers at the Bank of England have been monitoring wage growth closely, particularly after UK CPI rose to 3% in January, a full percentage point above the central bank's 2% target.

Today’s data comes after a report from Brightmine yesterday showed employers were cautious ahead of April's increase in payroll taxes, with pay growth expected to slow considerably.

Attention is now turning to the Bank of England, which is set to leave its interest rate unchanged at 4.5% as policymakers face a challenging macro backdrop. Inflation is expected to rise further to 3.7% in Q3, as the UK's lost grace has contracted, requiring opposing policy measures.

For this reason, the Bank of England is likely to continue with its cautious, gradual approach to cutting interest rates, with a 25-basis-point rate cut priced in for the main meeting and another cut later in the year.

A cautious-sounding Bank of England governor Andrew Bailey, particularly in light of the uncertainties surrounding Trump's trade tariffs, had risk sentiment pulling stocks lower. Housebuilders and retailers could be harder hit.

FTSE 100 forecast – technical analysis

FTSE  has extended its recovery from the 8460 March swing low, recovering above the 50 SMA and 8615 resistance. However, buyers have so far failed to rise above the rising trendline resistance dating back to mid-December at 8730.

Buyers need to rise above here to extend gains towards the 8800 round number and 8850, the February 13 high.

Failure to rise above trendline resistance could see the price ease to the 50 SMA at 8625 and the 8615 mid-February low. Below here 8480, the May high comes into play.

USD/JPY steadies after the Fed left rates unchanged

• Fed left rates unchanged at 4.25% -4.5%
• Fed chair Jerome Powell re-assured the markets
• USD/JPY remains in a medium-term down trend

USD/JPY is holding steady, with the US dollar hovering around a five-month low after the Federal Reserve left interest rates unchanged as expected and also indicated that two more rate cuts were likely this year despite uncertainties surrounding US tariffs.

The Fed left rates at 4.25 to 4.5%, leaving rates on pause for a second straight meeting in order to assess the impact of Trump's trade tariffs. The fat raised its inflation forecast to 2.7% whilst cutting its growth forecast to 1.7%. Despite the stagflationary outlook and rising uncertainties, the Fed considers two more rate cuts this year as likely. Federal Reserve chair Jerome Powell also said that whilst the odds of a recession were higher, it was still an unlikely scenario.

Comments from Federal Reserve chair Powell seemed to reassure the market. Helping the US dollar stabilise.

Looking ahead, attention today will be on US jobless claims, which are expected to rise to 224k from 220k. Weaker-than-expected data could pull the USD lower.

Meanwhile, the JPY trades below its 5-month high after

USD/JPY forecast – technical analysis

USD/JPY trades within a falling channel dating back to the mid-January high of 158.90. The recent recovery from the 146.50 5-month low ran into resistance at 150.14 and corrected lower. The downtrend remains intact, and the long upper wicks on recent candles suggest that there was little buying demand at the higher levels.

Sellers will look to take out support at 148.60 to extend the move lower to 147.00, the September high and 61.8% Fib retracement.