Asia Mid-Session Bell: Risk-on in stock indices as Trump teases upcoming major trade announcement, pound rallied ahead of BoE meeting

As expected, the US Federal Reserve held the federal funds rate steady at 4.25%–4.50% for the third consecutive meeting, maintaining its cautious “wait and see” approach amid growing concerns over the economic impact of US trade tariffs. In its post-FOMC statement, officials highlighted rising risks on both sides of the Fed’s dual mandate, noting increased concerns about both inflation and unemployment.

During the press conference, Fed Chair Jerome Powell reiterated his recent messaging: “We don’t think we need to be in a hurry.” He acknowledged that both a rate cut and a pause remain possible but emphasized uncertainty, stating, “I couldn’t confidently say that I know which direction policy will take”.

US equity markets initially fell after the FOMC decision, with the S&P 500 posting an intraday loss of 0.5%. However, stocks rebounded during Powell’s press conference, closing the session with a 0.4% gain. The US dollar strengthened slightly, with the Dollar Index rising 0.5% to test near-term resistance at its 20-day moving average around 99.80. Gold (XAU/USD) declined by 2% but held above support near US$3,360 from the previous Asian session.

According to the CME FedWatch Tool, markets are now pricing just a 20% chance of a 25-basis-point rate cut in the June FOMC meeting, down from 30% prior to the announcement. Despite the near-term uncertainty, expectations remain for three 25-bps cuts in 2025, bringing the policy rate down to 3.50%–3.75%.

On Wednesday, President Trump claimed China initiated upcoming trade talks, stating he would not reduce tariffs to encourage negotiations. Treasury Secretary Bessent confirmed that this weekend’s discussions in Switzerland are preliminary in nature. In a Truth Social post during today’s Asian session, Trump announced a 10 a.m. Washington D.C. press conference to reveal “a major trade deal with a big country.”

A New York Times report later identified the UK as the likely partner in this trade deal. The British pound responded positively, rising 0.4% intraday against the US dollar and holding support at its 20-day moving average (1.3300), despite expectations of dovish forward guidance from the Bank of England later today.

Trump’s trade-related announcement sparked mixed reactions across asset classes. US stock futures advanced, with the S&P 500 and Nasdaq 100 E-mini contracts up 0.8% and 1.1%, respectively. Asian equity markets also responded positively: Japan’s Nikkei 225 rose 0.4%, while Hong Kong’s Hang Seng Index climbed 1.1%.

Conversely, safe-haven demand also increased. Gold (XAU/USD) rebounded 1.2% intraday, recovering over half of the previous day’s losses, suggesting lingering market caution despite the trade optimism.

Since it's 21 April 2025 minor swing high of 0.8624, the price actions of the EUR/GBP cross pair have been evolving in a minor descending channel and traded below the 20-day moving average since 28 April.

In addition, its hourly RSI momentum indicator has continued to exhibit a bearish momentum reading since 8 May, which suggests that the EUR/GBP may continue its minor downtrend phase (see Fig 2).

Watch the 0.8540 key short-term pivotal resistance with the next intermediate supports coming in at 0.8450 (20-day moving average) and 0.8410 next.

On the flip side, a clearance above 0.8540 negates the bullish tone for a potential squeeze up to expose the next intermediate resistances at 0.8580 and 0.8620.