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FTSE 100 forecast for December 2022

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The FTSE 100 index has recovered modestly in the past few weeks as hopes of central banks’ pivot increased. It rallied to a high of £7,633, which was the highest level since June. This recovery has turned the Footsie positive for the year, meaning they have outperformed their American counterparts like the Dow Jones and Nasdaq 100 indices.

UK stocks recovery accelerates

The FTSE 100 index has recovered modestly even as concerns about UK’s recession continued. In a report published on Monday, CBI warned that the UK would fall into a year-long recession in 2023 as inflation remained at an elevated level. 

The organisation expects that the economy would contract by 0.4% in 2023 as business investments pulled back. It recommended that the government should unlock business investments by changing regulations, changing the immigration system, and removing the block to onshore wind. According to CBI, these measures will unlock about £50 billion of capital investments.

The FTSE 100 recovery has also coincided with the rebound of the British pound. After crashing to the lowest level since the 1980s, the sterling has rebounded by more than 18.8% from its lowest point this year. 

A key catalyst for the FTSE and GBP/USD recovery is the view that the Bank of England and the Federal Reserve will slow the pace of rate hikes. In his statement last week, the Federal Reserve Chair hinted that the bank will hike rates by 0.50% in December.

Meanwhile, with the UK in a recession, the Bank of England will likely lower the size of rate hikes in its meeting next week. They also expect that it will hike by 0.50% in December.

The key drivers for the FTSE 100 index in the past 30 days were Hikma Pharmaceuticals, Fresnillo, Centrica, Prudential, and Associated British Foods (ABF). All these stocks have rallied by over 17% in this period. On the other hand, the top laggards were Vodafone, Shell, Persimmon, BP, and GSK.

FTSE 100 forecast

FTSE 100 chart by TradingView

The daily chart shows that the FTSE 100 index has been in a strong bullish trend in the past few weeks. In this period, the index has moved above all moving averages while the MACD has continued rising. The Relative Strength Index (RSI) has risen and is approaching the overbought level.

It also moved above the important resistance level at £7,520, the highest level since September 13. Therefore, the index will likely continue rising as buyers target the next key resistance at £7,690, the highest level in February.

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