FTSE100 post-Budget rally: Inverse Head & Shoulders eyes 9800Chancellor Reeves unveiled tax rises worth £26 billion annually by 2029-30 but showed fiscal discipline by committing to reduce government spending as a share of GDP each year and more than doubling the fiscal headroom buffer to £21.7 billion, reassuring bond markets still scarred by the Liz Truss mini-budget crisis.
With gilt yields falling, sterling at its best level since October, and a Bank of England rate cut expected in December, the macro backdrop supports further upside for Footsie, though sticky inflation and OBR growth downgrades remain headwinds.
Key drivers:
UK Budget introduces tax rises totalling £26bn annually by 2029-30 via threshold freezes, mansion tax, and dividend levies, but spending will decline as a share of GDP each year, calming government borrowing concerns and sending gilt yields lower.
Fiscal headroom buffer more than doubled to £21.7bn (from £9.9bn last year), giving bond vigilantes confidence that the debt trajectory is sustainable.
Sterling rallied above 1.32 towards 1.33 on lower borrowing risks, while FTSE 100 gained, led by financials.
Bank of England expected to cut rates 25bp in December, supporting equities, though sticky inflation and OBR growth downgrades are headwinds.
Technical setup : inverse head and shoulders with neckline/support at 9,630 (38.2% Fib), measured move and Fib confluence target 9,800 (between 61.8% and 78.6% retracement).
Trade idea : Entry on pullback to 38.2% Fib (9,630), stop below previous low (9,434), target 9,800, for 2:1+ risk-to-reward.
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