FTSE 100 slides after a sudden jump in UK public debt

UK equities dropped as investors reacted to the stronger pound and the rising public debt in the UK. The FTSE 100, which tracks the biggest firms in the UK, dropped by 1%. According to the Office of National Statistics (ONS), public debt rose by more than £35.7 billion in September as the government continued to respond to the pandemic. The debt level was higher than the £32.4 billion that analysts were expecting and the previous month’s increase of £29 billion. As a result, Boris Johnson’s administration was forced to ditch its planned three-year spending plan. Instead, the government will focus its resources on addressing the pandemic. 

The British pound rose by almost 1% as the UK reported relatively strong inflation numbers. According to the ONS, consumer prices rose by 0.4% in September, pushing the prices up by 0.5% year-on-year. Similarly, the core CPI rose by 0.6% and 1.3% on a MoM and YoY basis, respectively. Still, the rate of inflation is below the Bank of England’s target of 2.0%. The rising prices were because of a sudden increase in meals served by restaurants and cafes after the Eat Out to Help Out program. Meanwhile, the retail price index rose by 1.1% from a year ago while the producer price index input and output fell by 3.7% and 0.9%, respectively. 

US futures wavered as traders reflected on mixed earnings from Snap and Netflix. Netflix reported relatively disappointing earnings as it added 2.2 million new subscribers. That was 300k below what analysts were expecting. Snap, on the other hand, reported strong user growth and a 52% increase in its profits. Later today, the market will react to earnings by companies like Tesla, Abbott Labs, Verizon, and Chipotle Mexican Grill, among others. Traders will also react to news on stimulus as Nancy Pelosi and Steve Mnuchin continue their deliberations.

EUR/USD

The EUR/USD price rose to an intraday high of 1.1873, which is the highest it has been since September 21. On the four-hour chart, the price managed to move above the previous high of 1.1832. It has also moved above the median line of the Andrews pitchfork tool. Also, it is above the 15-day and 25-day exponential moving averages. Similarly, the relative strength index (RSI) and the Chaikin oscillator have also risen. Therefore, the pair is likely to continue rising as bulls aim for the first pitchfork resistance at 1.1900.

GBP/USD

The GBP/USD price rallied as the market reacted to the higher inflation data and a weaker dollar. The pair is trading at 1.3063, which is the highest it has been since October 12. The pair has also re-entered the ascending channel that is shown in pink. It is also above the moving averages and the dots of the Parabolic SAR indicator. Also, the RSI has continued rising, which is a positive sign that it will climb to the next resistance at 1.3100.

UK100

The four-hour chart shows that the FTSE 100 index declined to a low of £5,780, which was its lowest level since October 15. This price is slightly above the September low of £5,765. The average true range has been rising, which is a sign that the index has been relatively volatile. Also, the index has moved below the short and medium-term moving averages while the two lines of the MACD are below the neutral line. Therefore, the pair is likely to continue falling as bears target the next support at £5,765.