FTSE 100 Forecast as UK Gilts Soar Ahead of BoE and Fed

Summary:
• The FTSE 100 index remained under intense pressure on Wednesday morning as the market refocused on the upcoming Fed and Bank of England

The FTSE 100 index remained under intense pressure on Wednesday morning as the market refocused on the upcoming Fed and Bank of England (BoE) interest rate decisions. The blue-chip index slipped to a low of £7,190, which was about 5% below the highest level in August of this year. It has fallen to the lowest point since September 8.

Fed and BoE decisions ahead

The FTSE 100 and other global indices have been in a steep sell-off in the past few days. Investors are waiting for the upcoming interest rate decisions from the Fed and the Bank of England. Economists expect that the Federal Reserve will deliver another jumbo rate hike of 0.75% when it concludes its meeting on Wednesday.

The same is true with the BoE, which will start its meeting on Wednesday. Analysts believe that the bank will hike by 0.50%, which will be the seventh rate hike this year. As a result, government bonds have been surging as investors move from stocks to bonds. 

In the United States, the 2-year government bond yield is approaching 4%, which is the highest level in over 15 years. Similarly, the 10-year and 30-year yields rose to 3.55% and 3.56%. UK Gilts have also been rising. The 10-year Gilt rose to 3.31%, which was the highest level since 2008. 

The FTSE 100 index has also slipped because of the crashing GBP/USD price. Sterling has crashed to the lowest level since 1987 and there are concerns that it will soon move to parity. As a result, many domestic companies of the Footsie index will likely be hit as the cost of imports rise.

FTSE 100 index forecast

The four-hour chart shows that the FTSE index has been in a strong bearish trend in the past few days. In this period, it has moved below the important resistance level at £7,327, which was the highest level on September 6. It has also dropped below the 25-day and 50-day moving averages while the Awesome Oscillator has moved below the neutral point.

Therefore, the index will likely continue falling as sellers target the next key support level at £7,138, which was the lowest level this year. A move above the resistance point at £7,230 will invalidate the bearish view. This view is consistent with the highly-accurate InvestingCube S&R indicator, which you can subscribe to here.