Whatever has been said about the negative consequences of Brexit for the British economy, it continues to develop. The Pound, of course, went down; however, the index of the London stock exchange FTSE100 is growing steadily after Brexit referendum which was held in June. Weakening in the Pound was a beneficial factor for the British stock market, and for the exporters of British goods.
The index has grown by 600 points after the referendum. At the beginning of today's European session, the FTSE100 index is near the level of 7014.0 and the rise in the index continues. Uptrend in the index is supported by the policy of the Bank of England to continue extra-soft monetary policy.
At the beginning of August, the Bank of England lowered the key interest rate to the record lows of 0.25%, which was the first decrease in rates since 2009. The interest rate reached the lowest level in three centuries. British Central Bank intends to purchase government bonds in the amount of 60 billion pounds and corporate bonds for the amount of 10 billion pounds, and also give commercial banks cheap four-year loans as part of the new project of urgent funding.
It is obvious that the British Central Bank applies all efforts to maintain economic growth during the transition phase of Brexit. Earlier, Prime Minister Theresa May said that the plan for British exit from the EU should be completed by March 2017.
At the end of September UK GDP for Q2 became known. GDP is an indicator of the state of economy in the country. British GDP has grown by 0.7% against the forecast of +0.6% and by 2.1% on annual basis and against +1.9% in the previous quarter. The economy of the country survived after the referendum and it is likely that the Bank of England may prefer more monetary policy easing. This will be a positive factor for the UK stock market and the FTSE100 index.
Market participants are waiting for the release of preliminary data on the British GDP for Q3 on Thursday at 11:30 (GMT+3).
It is expected that GDP will rise by 2.1% on annual basis. If the data on will be worse than expected, it will put pressure on the Pound, but will support the index FTSE100.
The main factors that could force the Bank of England to lower the rate are the weakness in GDP growth and labour market, and low inflation rate in the UK.
Today at 17:30 (GMT+3) Governor of the Bank of England Mark Carney will give a speech. Future actions of the Bank of England are still unknown. Market participants expect that Mark Carney will shed light on the future plans of the Bank. Volatility during his speeches usually rises sharply for the pound and the index FTSE100 of the London stock exchange.