European markets opened higher on Thursday, but London’s FTSE 100 index registered only a minor gain as investors digested the latest Federal Reserve decision and looked ahead to a crucial Bank of England (BoE) interest rate announcement and a potential breakthrough in US-UK trade negotiations.
Fed Holds Steady, Dollar Strengthens
The Federal Reserve maintained its benchmark interest rate at 4.25–4.50% following its May meeting, signaling patience as it monitors the economic impact of recent US tariff policies.
Fed Chair Jerome Powell emphasized the central bank’s intention to “be patient” while watching the data, noting ongoing uncertainty around tariffs and their effect on inflation and growth.
The decision to hold rates steady has supported the US dollar, which gained ground against both sterling and the euro in early Thursday trading.
FTSE 100 Flat as BoE Rate Cut Looms
The FTSE 100 inched up just 8.20 points, or 0.1%, to 8,567.53, reflecting investor caution ahead of the BoE’s policy announcement. The broader FTSE 250 and AIM All-Share indices outperformed, rising 0.6% and 0.5%, respectively. The BoE is widely expected to cut its base rate by 0.25 percentage points to 4.25%.
Market focus is not only on the rate cut itself, but also on the bank’s forward guidance-specifically whether it will signal a more aggressive easing cycle or stick to a “gradual and careful” approach. Analysts note that if the BoE maintains a cautious stance, sterling could rebound; a more dovish signal could see the pound weaken further.
US-UK Trade Deal Expected; PM Starmer to Update
Prime Minister Keir Starmer is set to provide an update on trade talks with the US later today, as reports indicate President Donald Trump is poised to announce a new trade deal with the UK.
The deal is expected to address tariffs imposed by the US last month, including a 10% levy on all UK exports and 25% tariffs on steel, aluminum, and cars. In return, the UK may lower some tariffs on American goods and make adjustments to the digital services tax that affects US tech firms.
However, the UK government has ruled out lowering food standards or weakening online safety laws. The agreement, if confirmed, would be the first since the US introduced sweeping tariffs in April and is seen as politically significant for both countries.
Corporate Movers and Market Highlights
- Next shares rose 1.2% after the retailer lifted its profit outlook for the second time this year, citing stronger-than-expected first quarter sales.
- InterContinental Hotels Group climbed 2.6% after reporting a 3.3% increase in global revenue per available room and reaffirming its 2025 profit target.
- Metro Bank gained 3.3% on news of a profitable first quarter, while Flutter Entertainment fell 2.5% after issuing mixed guidance for the year.
- Drugmakers GSK and AstraZeneca weighed on the FTSE 100, falling 1.1% and 2.3% respectively, amid ongoing tariff concerns for the sector.
With the BoE’s decision and a potential US-UK trade deal announcement both expected later today, market volatility is likely to remain elevated.
Investors are closely watching central bank guidance and trade headlines for signals on the direction of UK monetary policy, the pound, and the broader European market landscape.