FTSE Spikes Despite Chance of Hike
- FTSE breaks higher, yet range persists for now
- Rate hike continues to cast shadow
- US new home sales back to 2007 levels
The US markets have followed the European lead this morning, with stocks
soaring higher once more today. While traders will no doubt be ecstatic
at the prospect of such a bumper day of gains on the FTSE, it is
worthwhile noting that the UK index has largely been rangebound
throughout May, highlighting the possibility of another sell-off.
The prospect of a rate hike remains on the minds of traders, most
notably within the FX markets, where the dollar index reached a near two
month high. This week sees a whole host of Fed members come out the
woodwork to warn of the possibility of a June rate hike. Despite this,
there is a certain feeling that they’re talking up something which
remains relatively unlikely. A rate hike in July remains the most likely
eventuality, given the uncertainty surrounding the June Brexit vote and
the likely willingness to hike well ahead of the US Presidential
election in November.
Today’s outstanding US new home sales number breathed life into an
indicator which more often than not gets overlooked owing to its
relatively static nature. In posting the highest reading since 2007,
such a significant rise in new home sales (accounts for 10% of total
home sales) indicates a strong degree of economic confidence and
construction activity in the US. With a Fed rate hike seemingly around
the corner, it is clear that buyers are looking to lock down mortgages
before they become any more expensive.
