Week Ahead: Trump’s trade war threatens UK100’s record run

• UK100 ↑ 7% year-to-date

• One of best-performing indices in FXTM’s universe YTD

• Trump’s tariffs + UK data + BoE Bailey = volatility?

• UK jobs data sparked moves of ↑ 1.2% & ↓ 1.4% over past year

• Technical levels: 8846, 8800 & 8655

President Donald Trump has announced sweeping reciprocal tariffs on numerous trading partners!

These join the already imposed 10% tariffs on Chinese goods and 25% duties on all US steel and aluminium imports next month.

While Trump’s new tariffs raise the prospect of a global trade war, the delayed implementation could open doors to possible negotiations.

Beyond the trade drama, central bank decisions, high-impact data and corporate earnings will be in focus in the week ahead:

Monday, 17th February

• US markets closed: Presidents Day holiday
• JP225: Japan GDP, tertiary industry index
• SG20: Singapore trade
• USDInd: Philadelphia Fed President Patrick Harker, Fed Governor Michelle Bowman speech

Tuesday, 18th February

• AU200: RBA rate decision
• CAD: Canada CPI
• GER40: Germany ZEW survey
• UK100: UK jobless claims, unemployment, BoE Governor Andrew Bailey speech
• US500: US Empire manufacturing, San Francisco Fed President Mary Daly speech

Wednesday, 19th February

• CN50: China property prices
• JP225: Japan machinery orders, trade
• NZD: New Zealand rate decision
• ZAR: South Africa CPI, retail sales
• UK100: UK CPI
• USDInd: US FOMC minutes

Thursday, 20th February

• AUD: Australia unemployment
• CN50: China loan prime rates
• EUR: Eurozone consumer confidence, ECB 2024 financial statements
• TWN: Taiwan export orders
• US30: US initial jobless claims, Walmart earnings, Fed speech

Friday, 21st February

• CAD: Canada retail sales, BoC Governor Tiff Macklem speech
• GER40: Germany HCOB manufacturing & services PMI
• JP225: Japan CPI
• UK100: UK Retail sales, S&P Global manufacturing & services PMI
• RUS2000: US S&P Global manufacturing & services PMI, University of Michigan consumer sentiment

FXTM’s UK100 is in focus after recently touching a fresh all-time high at 8846.1.

Note: UK100 tracks the FTSE100 index – the benchmark measuring the stock performance of the 100 largest listed companies on the London Stock Exchange.

The Index has gained over 7% year-to-date, outperforming most of its global peers in the FXTM universe.

• GER40:  +13.6%
• EU50: +12.3%
• NETH25: 8%
• US500: +4%
• NAS100: +4.9%
• RUS2000: +2.3%
• JP225: -1.9%
• TWN: 0.5%

A weaker pound and expectations around lower UK interest rates remain key drivers behind the UK100’s positive year-to-date gains.

Note: Over 80% of the revenues from FTSE100 companies come from outside of the UK. When the pound depreciates, it results in higher revenues for those companies that acquire sales from overseas – pushing the UK100 higher as a result. The same is true vice versa.

After notching repeated record highs, could Trump’s tariff war or souring sentiment towards the UK economy threaten UK100 bulls?

Here are 3 factors that could move the UK100 in the week ahead:

  1) Trump’s reciprocal tariffs

The UK could be thrown into the firing line if Trump’s reciprocal tariffs target countries using a VAT tax. Such tariffs could negatively impact the British economy, souring appetite for riskier assets.

Note: Value Added Tax (VAT) is a tax added to the sale of goods and services in the UK. In the United Kingdom, the standard VAT rate is 20%.

• If Trump targets the UK economy, this may expose the UK100 to downside risks.

• However, if the UK is not targeted the UK100 may see a relief rally as an element of uncertainty is removed.

  2) UK data + BoE Bailey speech

A string of top-tier data and a speech by Bank of England Governor Andrew Bailey may influence bets around BoE rate cuts.

• Tuesday, 18th February: UK January jobs data, BoE Governor Bailey speech

The incoming UK jobs data should provide fresh insight into the health of the UK labour forces. BoE Bailey’s speech could provide fresh insight into future policy moves.

Traders are currently pricing a 93% probability of a 25bp BoE cut by May.

Over the past 12 months, the UK jobs data has triggered upside moves of as much as 1.2% or declines of 1.4% in a 6-hour window post-release.

• Wednesday, 19th February: UK January CPI

The consumer price index, which measures headline inflation could offer clues about when the BoE will cut rates.

Annual inflation is expected to jump 2.8% from 2.5% in the previous month, while the core reading is seeing rising 3.6% to 3.2%. The month-on-month print is forecast to drop 0.3%.

Over the past 12 months, the UK CPI has triggered upside moves of as much as 1.0% or declines of 0.7% in a 6-hour window post-release.

• Friday, 21st February: UK Retail sales, S&P Global PMI’s

Overall, these data releases could provide insight into the health of the UK economy.

Over the past 12 months, the UK retail sales has triggered upside moves of as much as 1.3% or declines of 1.2% in a 6-hour window post-release.

  3) Technical forces

The UK100 is firmly bullish on the daily charts with prices above the 21, 50, 100 and 200-day SMA. However, the Relative Strength Index indicates prices are flirting near overbought territory.

• A solid daily close above 8800, could open a path toward 8846.1, 8850 and 8900.

• Sustained weakness below 8800 may trigger a decline toward 8655 and the 21-day SMA at 8633.