The FTSE 100 Index (INDEXFTSE: UKX) declined on Thursday as investors reacted to news of a contraction in the UK ‘s construction industry. The Index was at 8,666 points and down by 1.6% at the time of writing, the biggest single-day loss since August 2024. The decline was also influenced by a decision by the European Central Bank (ECB) to lower interest rates from 2.90% to 2.65%.
The Two-Pronged Assault On the FTSE 100 Index
US President Donald Trump and UK Prime Minister Keir Starmer met in late February, in what could have averted US tariffs against UK imports. However, Trump also recently announced tariffs against the Eurozone, which could have a ripple effect on the price of goods and services.
The ECB’s move to cut interest rates means the euro is likely toweaker relative to the pound, making the UK’s exports to the EU more expensive. The UK exports about £356 billion worth of goods and services, accounting for about 42% of its total exports. Therefore a stronger pound sterling means UK exports are more expensive, potentially limiting the demand. That does not augur well for the FTSE 100 Index.
Meanwhile, the UK’s construction Purchasing Managers Index (PMI) declined in February to 44.6 from January’s 48.1 and below the forecast figure of 49.5. That is interpreted as a sign of weakness in the UK economy, adding downward pressure on the FTSE 100 Index.
FTSE 100 Forecast
The FTSE 100 Index will likely head downward if action stays below 8,679 points. The first support is likely to be established at 8,649 points level. However, an extended control by the sellers will break below that level and could potentially go lower to the second support at at 8,614.
Conversely, moving above 8,679 points will signal a shift in the momentum to the upside. In that case, the action is likely to go higher and encounter the first barrier at 8,711 points breaking above that level will invalidate the downside narrative and could potentially test 8,750.
