By Amanda Cooper and Samuel Indyk
LONDON (Reuters) -The pound rose on Thursday, lifted by a surprise split in votes on rates by Bank of England policymakers, while shares in UK companies rallied, after U.S. President Donald Trump said he had struck a “full and comprehensive” trade deal with Britain.
The BoE cut its main rate by a quarter point to 4.25%, as widely expected, although there was a three-way split among policymakers as Trump’s tariffs weigh on global economic growth.
Sterling jumped, rising to $1.332, from $1.326 before the decision, as traders trimmed their bets on the chances of the BoE delivering another three rate cuts this year.
“Two members including chief economist Huw Pill preferred to leave rates unchanged. That may reduce speculation as to a possible back-to-back reduction at next month’s meeting,” Investec chief UK economist Philip Shaw said.
The pound had received a boost from an overnight report by the New York Times that flagged the possible trade deal between Britain and the United States.
On his Truth Social platform on Thursday, Trump said he would hold a press conference later with details and the agreement would “cement the relationship between the United States and the United Kingdom for many years to come”.
Britain’s Prime Minister Keir Starmer will also provide an update later on Thursday on trade talks with the United States, a spokesperson for his office said.
A deal would be the second for Britain in a week after it clinched a free trade pact with India.
London’s FTSE 250 index of midcap companies, which are more sensitive to the domestic economy, rose 1.1%, beating the large-cap 100 index, which rose just 0.3%.
The globally focused FTSE 100 on Tuesday racked up 16 straight days of gains, its longest winning streak on record, powered by a solid first-quarter earnings season and optimism over a thawing in global trade tensions.
“The UK has struggled to make deals with different countries following the exit from the EU and has been waiting on a deal with the U.S. for a long time. It definitely matters but lets see what the deal is going to be,” Kirstine Kundby-Nielsen, FX analyst at Danske Bank, said.
“I’m cautiously optimistic. On balance I would think it’s positive for the pound,” she said.
The pound was last up 0.3% against the euro at 84.78 pence per euro.
Unlike many of its major trading partners, the United States has a small trading surplus with Britain, to the tune of some $12 billion. Britain’s main U.S. goods exports are in the form of cars, steel and pharmaceuticals.
Shares in energy companies were the prime gainers on the mid-cap index, while the FTSE 100 kept in positive territory thanks to a rally in the aerospace and defence sector, while drugmakers Astrazeneca and GSK proved the biggest drags.
(Additional reporting by Lucy Raitano; Editing by Bernadette Baum, Gareth Jones and Ed Osmond)
