The Pound Suffers but Resists

FTSE 100

Key zone: 9,450 -9,550

Buy: 9,550 (on a strong positive foundation); target 9,700-9,750; StopLoss 9,480

Sell: 9,400 (on a pullback after a retest of the 9,500 level); target 9,250; StopLoss 9,450

After a long pause, the United Kingdom published a full set of inflation indicators, which turned out to be softer than expected. This increased pressure on GBP-related assets and at the same time gave momentum to the British stock market, allowing the FTSE 100 index to approach its all-time high — it is now less than 1% away. The index may update its record as early as this week.

Key data:

• The consumer price index for September remained unchanged, maintaining an annual growth rate of 3.8% versus the expected acceleration to 4.0%.
• The core consumer price index slowed to 3.5% y/y from 3.6% in August and 3.8% in July.

The main source of instability remains producer prices, the publication of which had been suspended since January due to data revisions. The results showed:

• The overall trend is accelerating, but core figures are below forecasts.
• Input prices rose by 0.7% y/y, output prices by 3.4% y/y.

The market reacted predictably: weaker inflation triggered a reassessment of monetary policy prospects.

Let us recall: the FTSE 100 is a market-cap-weighted “blue chip” index of the LSE (UKX). Major British companies remain relatively undervalued compared to their U.S. counterparts, while their cash yields (dividends + buybacks) remain high. Until 2026, the yield and buyback strategy looks like a sustainable support.

Since most revenues of British corporations are denominated in foreign currency, a weaker pound traditionally contributes to profit growth and overall index performance. Conversely, currency strengthening reduces multiples and pressures restated earnings figures, given that over 80% of sales come from external markets.

Currently, the FTSE 100 is up 1.5%, once again holding above the 9,500 mark — a level it closed above only once before, on October 8. Stocks are supported by the weakness of the pound and expectations of softer BOE rhetoric. Since April, the pound had quickly rebounded upward from the 1.3250 support zone but has now broken below it.

While inflation continues to decline and the Bank of England’s key rate remains at 4% with a tendency toward further easing, the “carry + low FTSE multiples” strategy remains an attractive alternative to overvalued American equities. For growth, improvement in China’s situation and the commodity sector or a weaker pound are necessary. Pressure on the index, however, could come from tighter policy, falling commodity prices, and GBP weakness.

So we act wisely and avoid unnecessary risks.

Profits to y’all!