It was UK day as the Bank of England cut rate by 25 basis points which was not a surprise, but the dissenters who wanted to cut by 50 basis points and dissenters who wanted to leave right unchanged. That put the BOE Chair Bailey in the hot seat as he maneuvered through Q&A questions.
Despite the rate cut, the BOE’s guidance remained unchanged, emphasizing a “gradual and careful” approach to easing—repeating the tone from March.
After that, the US and the UK announced the framework for a trade deal. According to US commerce Sec. Lutnick, the deal adds US$5 billion of opportunity for US exporters, and keeps a 10% tariff on all goods in place. He added that UK would buy $10 billion worth of Boeing planes. The US said that they would allow Rolls-Royce engines and plan parts to come over tariff free and exempted Rolls-Royce and Bentley automobiles from tariffs as well (thank goodness).
According to Trump, he and PM Starmer reached an agreement that will increase access for U.S. beef and ethanol, while also committing to reduce non-tariff barriers. As part of the deal, the UK will fast-track U.S. goods through customs, allowing for quicker movement in both directions.
Final details of the agreement are expected to be finalized in the coming weeks – a sentiement expressed by UK officials as well. Additionally, the U.S. will gain new market access for chemicals and machinery.
As Josh Brown on CNBC said sarcastically, “The US reached an agreement with its strongest ally for the last 200 plus years. Amazing news.”.
Later, Trump spoke of confidence for the forthcoming meetings with China over the weekend, and the NY Post, reported that the US may cut tariffs on China goods to 50% by as early as next week. Trump said the best a country can do is 10% tariffs.
Stocks were supported with gains now over the last 2 trading days after declines on the first 2 days of the week. For the day and the week (with one day to go):
- Dow rose 0.62%, and holding to a 0.12 gain for the week
- S&P rose 0.58%, but is still down -0.40% for the week
- Nasdaq rose 1.07% but is down -0.28% for the week.
The last day of the week will decide up or down for the week.
The USD move up vs the major currencies. A snapshot of the greenbacks gains vs the currencies showed the strongest gain vs the JPY (+1.45%) and the smallest gain vs the AUD (+0.34). The EUR fell -0.54% vs the USD and the GBP in volatile up and down trading on all the headline news, fell -0.37%. The CHF rose 1.01% vs the USD.
In the US debt market, yields moved higher helping to support the USD:
- 2 year yield 3.880%, +8.7 basis points
- 5 year yield 3.986%, +11.4 basis points
- 10 year yield 4.380%, +10.5 basis points
- 30 year yield 4.846%, +7.5 basis points
The US auctioned off $25B of 30 year bonds but was met with tepid demand (0.7 basis point tail and lower than average Bid to cover).
In other markets:
- Crude oil rose $2.17 or 3.74% to $60.24
- Gold fell $60 or -1.79% to $3304.98
- Bitcoin rose $5558 or 5.73% to $102,608
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