Sterling, FTSE Rise on Trade-Deal Hopes Ahead of BOE
(Bloomberg) -- The pound and FTSE 100 stock-index futures rallied on a report that US President Donald Trump is expected to announce a trade pact between the US and UK later Thursday.
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Trump teased the announcement of a 'major trade deal' in a social media post on Wednesday night, with subsequent reports indicating the country involved was the UK. Sterling gained as much as 0.5% to 1.3356 after the news before paring its advance.
The report 'is a modest positive' for the pound, said Moh Siong Sim, FX strategist at Bank of Singapore.
Dollar weakness has been the dominant theme in the currency market since Trump's April 2 tariff onslaught, amid concerns that the US may face economic recession and elevated price pressures. A Bloomberg gauge of the greenback has dropped about 4% in that time. Stocks have also felt the pressure; the benchmark FTSE 100 index has fallen 0.6% since then, while the Hang Seng China Enterprises Index is down more than 3%, and the S&P 500 is off 0.7%.
FTSE futures also rallied on the trade-pact news, gaining as much as 0.9% amid hopes the agreement will alleviate US tariffs on the UK.
'Trump's proposed UK trade deal could provide a short-term boost to UK exporters' in areas like financials, autos and energy, said Kimmy Tong, global market and FX strategist at Everbright Securities International. She is positive on the FTSE 100, seeing the current valuation of 12.6 as 'undemanding' compared with 15.5 in 2018, during Trump's first trade war.
Details around this deal might give an indication of what future deals with other countries might look like, said Mahjabeen Zaman, head of FX research at ANZ Banking Group Ltd.
Market attention will now turn to the Bank of England's interest rate decision, which is due later Thursday ahead of Trump's press conference.
'For sterling, the BOE outcome is equally important,' said Zaman.
The central bank is widely expected to cut interest rates by 25 basis points, and traders will be looking out for signals as to whether another rate cut may come as soon as next month, particularly given the hopes for the US-UK trade deal.
'We will be watching for monetary policy commentary on inflation and the future rate path to gauge whether risks are skewed toward a quicker easing cycle,' said Bank of Singapore's Sim.
(Corrects day of week in first and second paragraphs.)
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