There remains a great deal of apprehension within the market place since we’ve seen a decent rally from the lows set in the middle of last week.  Those bulls who jumped in around the lows of 5500-5600 will be rubbing their hands with glee and many would have been waiting for such a correction in order to add to existing long positions as opposed to having to pay 400 points higher than where we were a month ago.  Even though the causes of the substantial declines a week ago are desperately sad and unfortunate, if it wasn’t the people who’ve bought in the last few days pushing us higher it would have been someone else.

So we’re nearly back to where we were before the earthquake hit when the FTSE 100 (UKX) was around 5850 and it’s natural for a market that’s seen a few days of substantial gains to take a bit of time to reflect.  The 5800/50 area was a significant support level so now, as technical analysis theory dictates, it’s a significant resistance level.

This morning the FTSE is at 5745 and bulls will be hoping that support seen around 5690 will hold.  A break below here could see us test 5580 and even the lows of last week. 

So all eyes on the Chancellor today, but before he delivers his second ever budget we get the release of the BOE minutes this morning.  These will be very interesting to see whether anyone else has joined the hike camp with votes previously having been split 1 (more QE), 5 (nothing), 2 (hike by 0.25), 1 (hike by 0.50), so should we see a 1-4-3-1 then we could see further strength from sterling and it makes a rate hike this Spring all the more probable.

When the Chancellor stands up at 12h30 London time today unfortunately we cannot expect any sort of tax reductions or early Easter presents as he will remain vigilant about the approach the coalition is taking on government spending cuts.  You can’t envy his position especially after yesterday’s inflation numbers which are set to put more pressure on the British consumer and therefore the recovery.  On top of this the PSNB was much higher than expected meaning the public sectors insatiable appetite for sucking up funds is far from over.  Sweeteners such as reduced red tape here and no fuel duty hike there…

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