8th May 2025

The USD starts the day firmer across the board.

Less than dovish! The FOMC, last night, as fully expected voted to keep their benchmark rate unchanged, at a target of 4.25% - 4.5%, while saying in their statement that uncertainty about the economic outlook has increased further. The risks of both higher unemployment and higher inflation have risen.

Powell repeated we don’t think we need to be in a hurry (to cut) and brushed off perceived political pressure from Trump to move. Powell also expects Q1 GDP to be revised higher, while inflation is moving sideways at a fairly low level even if above the Fed’s target.

Meanwhile, all US stock futures stand materially in the green, led by the +1.1% NASDAQ, even as US President Trump said he’s unwilling to preemptively lower tariffs on China in order to unlock more substantive negotiations with Beijing on trade.

However, the market and GBP in particularly is buoyed by Trump's line that he plans to hold a news conference Thursday to discuss a “MAJOR TRADE DEAL WITH REPRESENTATIVES OF A BIG, AND HIGHLY RESPECTED, COUNTRY.” The NYT (and BBC News, The Times) reports the deal will be with Britain.

However, there are plenty more tariffs, global financial system related issues aired. The Nikkei reports the Japanese government is mulling the possibility of leveraging shipbuilding in tariff negotiations with the Trump admin; the Ukraine central bank governor is said to be mulling the EUR not USD as its reference currency and Trump could rescind global chip curbs amid AI restrictions debate.

And, Bbg reports China's government has announced a range of policies to stabilize markets, boost tech innovation, and protect small businesses ahead of landmark trade talks with the US. The policies include across-the-board rate cuts that could pump over Rmb 2.0tln into the economy, and are seen as a bid to strengthen Beijing's hand in negotiations.

Ahead, a busy session.

This morning, the Riksbank is near fully tipped to leave its policy rate at 2.25%, with one or two risk rewarders perhaps looking for a surprise -25BPs move.

Soon after, the Norges Bank is also expected to leave its deposit rates at 4.50%, remaining the most hawkish of G10 central banks and still yet begin an easing cycle, as core inflation remains sticky.

Less GBP supportive, the BOE are expected to cut the Bank Rate by -25BPs to 4.25% later. Guidance will be critical. The market is pricing around -100BPs of easing to come in 2025. Is that more than ‘gradual’? Could we be set for even more given the energy price drop and very real concerns over the growth outlook?

On the data front, German (1.0% m/m forecast) and Norway IP kick things off at the top of the hour.

In the second half, US hard data watch continues in the form of preliminary Q1 non-farm productivity and unit labour costs as well as initial claims and after April's NY Fed 1-year inflation expectations (3.58% last time).

Overnight, the RICS house price balance fell to a first negative outturn since last summer at -3 in April vs 2 last.

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