May 08, 2025

“Central bank decisions in the UK, Sweden, and Norway are in the diary today, and then the market will be watching a press conference from Trump on what is expected to be a UK-US trade deal.”

Tim Hallinan – Trading Director

USD

The dollar is building some momentum this morning amid last night’s relatively hawkish Fed decision and news of a likely announcement for a UK-US trade deal today. To summarise the Fed meeting in short: policymakers have no clue on how trade policy will evolve, or whether the data is going to hold up or fall off a cliff, so they are going to sit on the sidelines and wait until they have some reasonable idea of what appropriate policy looks like. One of the key uncertainties in terms of further rate cuts is that the Fed is facing shocks to both sides of its dual mandate, and it cannot lean against both higher inflation and higher unemployment simultaneously. It might face some very difficult choices if the job market is weakening just as prices are ratcheting higher.

It has not been confirmed which country Trump was referring to in a late-night Truth Social post promising a press conference on a trade deal today (4:00PM CET), but the NYT and others have suggested that it is the UK. While it was always going to be the easiest to negotiate, we should get some important clues on what the Trump administration is willing to give away in terms of tariffs, and it might serve as something of a template for future negotiations. There is also some jobless claims data today.

GBP

Despite an initial spike on the first reports of a UK-US trade deal overnight, sterling has struggled to hold on to a lasting advantage. That will partly because there was relatively little for the UK to gain beyond help for the auto sector, given that it only received the 10% base rate tariff and exports are predominantly in services. The Bank of England is the other major event today. The market is fully certain that we will get another rate cut, as the quarterly pace that began last August continues – the key will be the assessment of the trade situation and whether there is any hint towards accelerating this pace through the summer. Traders think there is a good chance that this will come eventually, and there are three more cuts priced in after today’s decision.

EUR

The euro is trading on the softer side this morning. There is no major data out of the eurozone today, but the European Commission is set to announce the details of its next retaliatory measures on US imports in the case that negotiations fail. In the Nordics, we have decisions from both the Riksbank and the Norges Bank this morning, with the former already holding rates steady and tilting its tone towards further rate cuts, after previously calling the end to the easing cycle. Norwegian policymakers are yet to cut at all, and a rate cut is still not fully priced until September.

Markets

Global stocks were choppy yesterday but largely closed higher, with the major US indices initially dropping on the Fed’s hawkish done before surging in afterhours trading on the news that Trump would announce a first completed trade deal today.

Main Economic Events (All Times CET)

9:30am: Riksbank Policy Decision
10:00am: Norges Bank Policy Decision
1:02pm: Bank of England Policy Decision
2:30pm: US Unemployment Claims

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