Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
TheBank of Englandis in the spotlight today, as policymakers at the UK central bank set interest rates in the face of a global trade war, and a weak domestic economy.
To be honest, there’s not much suspense in the City this time. The BoE is widely expected to cut interest rates for the fourth time in the current cycle, at lunchtime.
Bank Rate is currently 4.5%, and many traders suspect the only question is whether the monetary policy committee restricts itself to a quarter-point cut, to 4.25%, or gets the big bazooka out and votes for a half-point cut, to 4%.
This morning, a quarter-point cut is much the more likely – it’s priced at a 95% chance in the money markets. A half-point cut would be a surprise, as it’s seen as just a 5% possibility.
James Mashiter, fixed income portfolio manager at asset managerSEI, says:
The Bank will be concerned that Donald Trump’s trade war will hurt the global economy, with a knock-on impact on UK growth (governor Andrew Bailey often mentions how Britain is an open economy).
But they’ll also have to assess the impact on inflation – if manufacturers from China, say, redirect products initially destined for the US into the UK market, at bargain prices.
Last month, the Bank warned that Donald Trump’s sweeping tariffs have put global growth at risk.
Ranjiv Mann,senior portfolio manager atAllianz Global Investors,predicts a quarter-point cut, given the downside risks for the global growth outlook, and told clients:
UK economic activity remains weak and trade policy uncertainty has risen sharply in recent months, weighing on UK consumer and business sentiment.
The Bank has been taking a cautious policy approach since it last cut rates in February given that CPI inflation remains above its target. However, business sentiment is now beginning to be weighed down by trade policy uncertainty, placing renewed downside risks for the UK economic outlook.
Short term interest rate markets are pricing at least a further three rate cuts in 2025; if the risks of a global trade war intensifies over the coming months, markets may well bring forward UK rate cut expectations.
Last night, the US Federal Reserve left interest rates on hold, and warned that Donald Trump’s tariffs were likely to raise prices, weaken growth and increase unemployment if maintained.
One housekeeping note – today’s decision, and the Bank’s latest economic forecasts, will be delayed by two minutes to honour the silence to mark the 80th anniversary of VE Day. So it’ll be announced at 12.02pm, rather than noon
7am BST: Halifax UK house price index for April
12.02pm BST: Bank of England interest rate decision
12.30pm BST: Bank of England press conference
1.30pm BST: US weekly jobless data
Newsflash: TheBank of Englandhas cut UK interest rates, by a quarter of one percentage point.
The move, which matches City expectations, lowers Bank rate to 4.25%, its lowest level in around two years.
More to follow…
There’s just 20 minutes to wait until we get the Bank of England’s interest rate decision.
Reminder, it’s scheduled for 12.02pm, just after the two-minute silence to mark VE Day.
A quarter-point rate cut is still widely expected, which would bring Bank rate down to 4.25%.
Some City analysts predict an 8-1 split on the monetary policy committee – with eight members voting for a quarter-point cut (from 4.5% to 4.25), and just one voting for a larger, half-point reduction (to 4%).
Matthew Ryan,head of market strategy at global financial services firmEbury, says:
Donald Trump has declared that today should be “a very big and exciting day” for the US and the UK – a clear sign that some form of trade agreement will be announced at 3pm UK time, or 10am at the White House.
Posting on his Truth Social site, the US president says:
Our Politics Live blog is tracking the latest developments:
Shipping group A.P. Moller-Maersk has cut its forecast for demand this year, due to the US trade war.
Maerskwarned this morning that trade disruption and geopolitical uncertainty could trigger a drop in global container volumes this year.
Maersk, a barometer of world trade, has revised down its forecast for global container market volume growth to between -1% and 4%. Previously, it had forecast 4% growth this year.
Maersksays:
The US dollar has gained ground in the currency markets today, as investors welcome the news that Donald Trump will announce a trade deal (or progress on one, at least) later today.
The greenback has gained against a basket of currencies, nudging the dollar index up by 0.5% today.
The pound has lost its earlier gains, and is now down 0.25% at $1.326.
As well as trade deal optimism, the dollar is also benefitting from last night’s Federal Reserve decision to leave US interest rates on hold yesterday.
Charalampos Pissouros, senior market analyst atXM, says:
Markets are facing a flurry of major news on interest rates, trade and conflict today, points outRuss Mould,investmentdirector atAJ Bell.
Summing up the situation, he says:
One in six UK companies anticipated being hurt by the US trade war, new data shows, highlighting the importance of the deal expected to be announced by Donald Trump later today.
TheOfficeforNationalStatistics’ latest real-time economic data shows that firms expect weaker demand as they pass on costs to customers.
TheONSsays:
The City are expecting several UK interest rate cuts this year, incuding one just after noon.
The money markets are indicating that Bank rate will be cut by 96 basis points, or almost a whole percentage point, by the end of the year. That means that four quarter-point cuts this year are all-but priced in.
Guillermo Felices, global investment strategist atPGIMFixedIncome,says:
We also have an interest rate decision in Norway.
But as in Sweden, they’ve left rates unchanged at 4.5%, while hinting that borrowing costs will be lowered this year.
Norway’scentral bank,Norges Bank,says:
Sweden’s central bank has left interest rates on hold this morning, despite concerns about the economic outlook.
Sveriges Riksbankhas maintained its policy rate at 2.25% today, with policymakers concerned that Donald Trump’s new US trade policy has increased uncertainty in the global economy.
TheRiksbanksays:
Today could be a major one for the UK economy, suggests theBBC’seconomics editorFaisalIslam, if we get an interest rate cut and progress on a US trade deal:
Shares have opened a little higher in London.
TheFTSE100index of blue-chip shares is up 0.2%, or 16 points higher, at 8575 points.
Engineering firmsIMI(+3%) – which reaffirmed its full-year guidance this morning – andWeirGroup(+2.8%) are the top risers, along with technology-focused investment trustScottishMortgage(+2.8%), and packaging firmMondi(+2.5%).
Among smaller companies, luxury carmakerAstonMartin’sshares have jumped by 6%.Late last month it limited sales to the US due to Donald Trump’s tariffs, so it could be benefitting from hopes of a US-UK trade deal….
Britain’s warmer than usual start to spring may have helped to brighten the macroeconomic gloom for UK households (and Next!)- but it has come at a cost to British Gas, my colleague Jillian Ambrose reports.
Its parent company,Centrica, told shareholders ahead of its annual general meeting in Manchester today that the warmer weather would hit profits at the UK’s second largest home energy supplier after households were able to switch their home heating off earlier than usual.
TheFTSE100energy giant assured investors that it still expects the supplier to remain within its £150m to £250m sustainable profit margin for the year. It added that it is also seeing “organic growth” in its business and household customer base.
This will come as welcome news afterBritishGaswas ousted as UK’s largest home energy supplier by Octopus Energy last year, a position it has held since the privatisation of the industry in the 1990s.
Shares inCentricahave fallen by over 5% in early trading in London.
Over in Germany, factory output has risen amid a rush for new goods ahead of Donald Trump’s tariffs.
German industrial production jumped by 3% in March, new data from statistics bodyDestatisshows.
The increase was driven by the automotive industry (+8.1%), the pharmaceutical industry (+19.6%) and the manufacture of machinery and equipment (+4.4%).
Data earlier this week showed that America’s trade deficit hit a record in March, partly due to a surge of imports of pharmaceutical products and cars.
Carsten Brzeski, Global Head of Macro atING, says Germany industry is “bottoming out”, after a rough time.
UK retailer Next has raised its profit forecast after benefitting from hot weather in recent weeks.
Nexthas told the City this morning that trading in the last three months (26 January to 26 April 2025) had been “better than expected”.
Full price sales over the quarter have risen by 11.4%, almost twice as fast as the 6.5% it had expected, as shoppers have scrambled to buy new “summer-weight clothing”as temperatures rose.
Nextexplains:
It has lifted its guidance for pre-tax profits this year by £14m, to £1,080m.
Back in March,Nextbecame the fourth UK retailer to report £1bn of profits for a financial year:
UK lender Halifax has reported that UK house prices nudged higher last month.
According toHalifax, the average house price increased by 0.3% in April to £297,781, a slowdown on the 0.5% growth recorded in March.
On an annual basis, prices were 3.2%% higher in April than a year ago, up from 2.9% in the year to March.
The bigger picture, though, is that prices have been “remarkable stable” over the last six months,Halifaxsays, down just £48 over the period.
AmandaBryden, Head of Mortgages atHalifax, reports that the end of the stamp duty holiday at the start of April did not have a major impact on the market, contrary to other reports.
However, last week rival lenderNationwidereported that UK house prices dropped by 0.6% on average in April, which it attributed to the rush in March to beat changes to stamp duty….
Donald Trump’s “major trade deal” announcement later today (3pm UK time) will be closely watched, for at least two reasons.
As well as the identity of the country involved, investors will want to know what the framework of the deal looks like – as a sign for how other negotiations may play out.
Jim Reid, market strategist atDeutscheBank, explains:
Hopes that the US and UK have agreed the framework of a trade agreement have given the pound a small lift, and could push shares higher in London today too.
Sterling jumped as much as half a cent in early trading, to as high as $1.3356, before slipping back to around $1.332.
The move follows reports thatDonaldTrumpis planning to announce a new trade pact with the UK later today.
Trumphas caused a stir, by posting on his Truth Social site that a major trade deal would be announced today, saying:
Britain’sFTSE100share index is also expected to rise when trading begins at 8am, as traders anticipate that the UK could be the “big and highly respected” country involved.
A team of senior British trade negotiators landed in Washington on Wednesday as talks over a deal between the two countries gathered pace.
Officials from the UK business and trade department were attempting to get an agreement signed before a planned UK-EU summit on 19 May.
More here:
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
TheBank of Englandis in the spotlight today, as policymakers at the UK central bank set interest rates in the face of a global trade war, and a weak domestic economy.
To be honest, there’s not much suspense in the City this time. The BoE is widely expected to cut interest rates for the fourth time in the current cycle, at lunchtime.
Bank Rate is currently 4.5%, and many traders suspect the only question is whether the monetary policy committee restricts itself to a quarter-point cut, to 4.25%, or gets the big bazooka out and votes for a half-point cut, to 4%.
This morning, a quarter-point cut is much the more likely – it’s priced at a 95% chance in the money markets. A half-point cut would be a surprise, as it’s seen as just a 5% possibility.
James Mashiter, fixed income portfolio manager at asset managerSEI, says:
The Bank will be concerned that Donald Trump’s trade war will hurt the global economy, with a knock-on impact on UK growth (governor Andrew Bailey often mentions how Britain is an open economy).
But they’ll also have to assess the impact on inflation – if manufacturers from China, say, redirect products initially destined for the US into the UK market, at bargain prices.
Last month, the Bank warned that Donald Trump’s sweeping tariffs have put global growth at risk.
Ranjiv Mann,senior portfolio manager atAllianz Global Investors,predicts a quarter-point cut, given the downside risks for the global growth outlook, and told clients:
UK economic activity remains weak and trade policy uncertainty has risen sharply in recent months, weighing on UK consumer and business sentiment.
The Bank has been taking a cautious policy approach since it last cut rates in February given that CPI inflation remains above its target. However, business sentiment is now beginning to be weighed down by trade policy uncertainty, placing renewed downside risks for the UK economic outlook.
Short term interest rate markets are pricing at least a further three rate cuts in 2025; if the risks of a global trade war intensifies over the coming months, markets may well bring forward UK rate cut expectations.
Last night, the US Federal Reserve left interest rates on hold, and warned that Donald Trump’s tariffs were likely to raise prices, weaken growth and increase unemployment if maintained.
One housekeeping note – today’s decision, and the Bank’s latest economic forecasts, will be delayed by two minutes to honour the silence to mark the 80th anniversary of VE Day. So it’ll be announced at 12.02pm, rather than noon
7am BST: Halifax UK house price index for April
12.02pm BST: Bank of England interest rate decision
12.30pm BST: Bank of England press conference
1.30pm BST: US weekly jobless data