Investors Bet on Bank of England Rate Cuts with New Tariffs
LONDON (Reuters) - Investors added to bets on Bank of England interest rate cuts and government bond yields fell sharply as global markets braced for a hit to trade and growth from U.S. President Donald Trump's import tariffs on dozens of countries including Britain.
Interest rate futures on Thursday pointed to about 62 basis points of reductions to the BoE's benchmark Bank Rate by December, compared with around 54 bps on Wednesday which represented a full pricing of two quarter-point rate cuts.
The chance of a quarter-point rate cut at the BoE's next scheduled meeting on monetary policy in May was seen at about 77%, also up from Wednesday.
Two-year gilt yields fell to 4.067% at 0715 GMT, the lowest since October 23 and down about 10 basis points on the day. The 10-year yields touched their lowest since March 4 at 4.533%.
On Wednesday, Trump announced tariffs of 10% on UK exports to the United States, 20% on goods from the European Union and higher duties on other countries including 54% on China.
Britain's government said it was looking to secure a better trading deal with the US.
"The one silver lining is that the retaliatory tariff rate applied to the UK is the lowest among affected countries," Barret Kupelian, chief economist at PwC, said.
"Our European trading partners will face steeper tariffs, though some of that economic pain will inevitably spill over to UK firms through supply chains and shared markets."
(Reporting by Suban Abdulla; Editing by William Schomberg)
