BoE cuts 25bps to 4.25% as expected but decision not unanimous

Good morning

BoE did indeed cut rates 25bps to 4.25% yesterday as had been expected but the voting was something of a surprise.  Two members voted for a 50bps, that’s what I’d suggested yesterday morning, but two members voted for no change which was certainly a hawkish surprise and has led to some scaling back their forecasts of further rate cuts.  GBP whipsawed after the announcement, slipping to 1.3240 against USD before rallying to 1.3340, but then through the afternoon turned once again hitting a low overnight around 1.3210, now 1.3250.  GBP had also dropped against EUR after the announcement, falling to 1.1730 before recovering to 1.1820, now 1.1785. 

The Trump trade deal announcement that we’d been waiting for was indeed with the UK.  Details are sparse, there is no deal on paper, nor is there any real firm commitment but there seems to be something in the pipeline which involves UK buying US energy, beef and Boeing aircraft, while US will allow 100,000 UK cars in at a 10% tariff rate.  The US equity markets liked it, they closed up yesterday although the UK’s FTSE 100 was down 0.3% at the close. 

Trump expressed disappointment that Powell hadn’t cut rates, particularly as other central banks were cutting, with both China and UK cutting rates this week.  He said talking to Powell was like talking to a wall, while Vance said Powell is ‘wrong about everything’.  Not quite as aggressive as some of their recent comments but they are clearly not Powell’s biggest fan.  However Trump did add that the US economy was still doing well despite the lack of rate cut from the Fed. 

Trump will also be rather dismayed to see China’s trade surplus at $96bn for April.  That’s not all with the US but even so Trump will look at that as being hugely unfair.  Still, there is some talk that US are planning to reverse the tariffs on China to 50% as early as next week, and cut tariffs on other Asian countries to 25%.  Is that another u-turn, or US backing down?  Probably, but Trump certainly wouldn’t admit that.  US and China officials are said to be meeting this weekend to talk trade, there is a small chance therefore of a volatile market open on Sunday night should we get any news from those talks.

Bitcoin caught a bid yesterday, trading up from around $97,000 to $104,000, the first time we’ve been over $100,000 for three months.  Now just off those highs, I’ve seen nothing to explain the 7% rally but then the whole crypto world remains a mystery to me anyway.

Ukraine’s Zelensky has called for a 30 day ceasefire and the US has said they are in agreement.  Trump added that if a ceasefire is not respected, further sanctions will be imposed.  Meanwhile the Ukraine parliament has ratified the US minerals deal.

There is a new Pope and Trump will be pleased to see he is American.  Indeed I’m just waiting for Trump to say that he had arranged the appointment, though for now he has been rather reserved and has said just that it is a great honour to have a US Pope.  Pope Leo XIV will be holding his first mass in the glorious Sistine Chapel this morning.    

In sport, Spurs and Man Utd will face each other in the Europa League final after both teams extended their first leg leads with wins yesterday evening.  Man Utd are slight favourites at the bookies and I can’t really argue with that.  Still quite interesting that both teams are languishing near the bottom of the Premier League but one will be in the Champions League next season.  Wednesday 21st is the big day. 

Chelsea also won last night to set up a final against Real Betis on 28th May for the Europa Conference League.  Chelsea are firm favourites, as they have been for a while now.

Premier League action this weekend sees Arsenal take on Liverpool, a tough match given the number of teams breathing down Arsenal’s neck for those Champions League places.  Newcastle v Chelsea could be a good match, while at the other end of the table Man Utd play West Ham and Spurs take on Crystal Palace, those results will leave either Man Utd, Spurs or West Ham in the lowly 17th spot just above the relegation zone.

 The economic calendar today is made up mostly of central bank officials, starting with BoEs Bailey this morning.  Let’s see if he offers any further insight into those two ‘no change’ votes yesterday.   Next week we’ll have US CPI and PPI inflation, UK and EU Q1 GDP releases and UK unemployment.  We’ll also be looking out for any more US trade/tariff talk.

Looks like it’ll be getting a bit warmer over the weekend and into next week which will be most welcome given the rather cool week we’ve had. 

Have a great day, and a splendid weekend as and when it arrives.

-  09.40 BoEs Bailey speaks

-  11.15 Feds Williams speaks

-  11.45 Feds Barr speaks

-  13.30 CAD unemployment

-  13.30 Feds Kugler speaks

-  15.00 Feds Goolsbee speaks

-  15.45 ECBs Schnabel speaks

-  16.30 Feds Waller, Williams speak

-  23.45 Feds Cook speaks