8th May 2025 06:49
(Alliance News) - London's FTSE 100 is set to open higher on Thursday, clawing back Wednesday's loss, ahead of a Bank of England decision and as eyes remain fixed on tariff headlines.
Donald Trump will announce a trade deal with the UK on Thursday, US media has reported, after the president touted a "major" upcoming agreement on social media.
The New York Times and Politico reported that Trump was set to agree to a deal with the UK, citing multiple people familiar with the plans.
IG says futures indicate the FTSE 100 to open 72.0 points higher, 0.8%, at 8,631.33 on Thursday. The index of London large-caps ended down 38.09 points, 0.4%, at 8,559.33 on Wednesday, ending a 16-day winning streak.
Sterling faded to USD1.3314 early Thursday, from USD1.3342 at the time of the London equities close on Wednesday. The euro fell to USD1.1308 from USD1.1344. Against the yen, the dollar rose to JPY143.88 from JPY143.39.
"This week's Federal Reserve meeting went according to plan. It was hawkish—though just about as hawkish as expected. The Fed kept interest rates unchanged, as widely anticipated, and signalled it's in no rush to cut them before gathering more data to assess the real impact of the tariff policy. It believes tariffs could lead to higher inflation and higher unemployment. And even though the spike in inflation is expected to be temporary, there's a chance it could linger," Swissquote analyst Ipek Ozkardeskaya commented.
The Fed can afford to be patient with monetary policy as it awaits to see the full impact of US trade policy on the economy, Fed Chair Jerome Powell said on Wednesday.
"We think we can be patient, we are going to be watching the data," Powell said, noting there is so much uncertainty about the scale, scope and timing of tariffs.
Speaking to reporters, Powell said the Fed can move quickly when "that's appropriate" but won't make progress on its goals this year if tariffs stay.
At the conclusion of its two-day meeting the Federal Open Market Committee voted unanimously to maintain the target range for the federal funds rate at 4.25-4.50%.
In New York on Wednesday, the Dow Jones Industrial Average rose 0.7%, the S&P 500 added 0.4% and the Nasdaq Composite ended up 0.3%.
In Tokyo on Thursday, the Nikkei 225 was up 0.4% in late dealings. In China, the Shanghai Composite was up 0.2% in afternoon trade, while the Hang Seng Index in Hong Kong was 0.6% higher. The S&P/ASX 200 in Sydney was up 0.2%.
The Bank of England decides on rates on Thursday, with an announcement just after midday. It is expected to cut.
Pepperstone analyst Michael Brown commented: "The Monetary Policy Committee are also likely to open the door to a faster pace of policy easing, most likely by tweaking guidance that further cuts will take place at a 'gradual and careful' pace, and that policy must 'remain restrictive for sufficiently long' in order to bear down on the risk of persistent price pressures becoming embedded.
"The bank's latest economic forecasts, meanwhile, will likely point to a slower pace of economic growth than foreseen in February, but also to a considerably lower inflation profile, both due to a cooler than expected outturn in H1, and the disinflationary impacts of tariffs imposed on the UK economy. These forecasts, naturally, provide further support to the idea of more rapid cuts from here on in."
The UK government is on track to miss its key fiscal rules, increasing the likelihood of tax hikes later this year, an economic think tank has warned.
Economic growth is also on track to be weaker than previously expected this year, according to the National Institute of Economic & Social Research.
Fresh forecasts from the organisation indicated that a slowdown in domestic demand and global economic uncertainty will impact potential growth throughout the year.
It predicted that the UK economy will grow by 1.2% in 2025 "amid low business confidence, high uncertainty and rising cost pressures".
In its previous forecasts in February, Niesr had pointed to 1.5% growth for the year.
The think tank indicated that the reduced level of growth will result in lower than previously predicted tax receipts.
As a result, it said the government is now expected to miss its fiscal rules requiring UK national debt as a share of the economy to fall and to be on course for a budget surplus.
Thursday's local corporate calendar has full-year results from Airtel Africa and a trading statement from retailer Next.
A barrel of Brent edged up to USD61.51 on Thursday morning, from USD61.45 late Wednesday. Gold traded at USD3,375.81 an ounce, fading from USD3,386.18.
By Eric Cunha, Alliance News news editor
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