January Data Signals Early Slowdown
That January manufacturing production miss, coming in at 0.1%, set a cautious tone for the first quarter of 2026. While it is older data, it was the first sign of a slowdown that subsequent figures have confirmed. More recent preliminary PMI data for February also dipped to 47.1, reinforcing this view of a struggling industrial sector. This sustained weakness puts pressure on the Bank of England to consider a more dovish stance in its upcoming meetings. We are now pricing in a higher probability of a rate cut by the third quarter, a shift from the ‘higher for longer’ narrative we saw at the end of 2025. This situation is reminiscent of the policy pivot we observed in late 2024 when growth concerns began to outweigh inflation fears. Consequently, we are looking at bearish strategies on the British pound, particularly against the US dollar. Implied volatility on GBP/USD options has ticked up as traders anticipate more downside potential. Recent data shows the pound has already weakened by 1.5% against the dollar since the start of February. For the FTSE 100, the outlook is mixed, creating opportunities for relative value trades. The weaker pound is a tailwind for the index’s large international earners, which account for over 75% of its total revenue. However, domestically focused companies in the FTSE 250 are likely to underperform due to the sluggish UK consumer demand.FTSE Positioning And Relative Value
Create your live VT Markets account and start trading now.
Start trading now – Click here to create your real VT Markets account
