FOREX-Sterling rises with Aussie as Trump moots 'major' trade deal

By Kevin Buckland

TOKYO, May 8 (Reuters) - The pound jumped on Thursday, taking the Australian dollar with it, after U.S. President Donald Trump said he would announce "a major trade deal" later in the day, with the New York Times reporting it would be Britain.

Sterling GBP=D3 initially climbed as much as 0.5% before paring gains to be up 0.2% at $1.3315 as of 0535 GMT, even with the Bank of England widely expected to announce a quarter-point rate cut later in the day.

The risk-sensitive Aussie AUD=D3 leapt as much as 0.6% against the greenback, and the New Zealand dollar NZD=D3 advanced as much as 0.5%, before each pared gains to around 0.3%.

Posting on his Truth Social platform, Trump said he would hold a new conference at 1400 GMT about a "major trade deal with representatives of a big, and highly respected, country," adding that it would be the "first of many." He did not name the country or provide other details.

Prior to the New York Times report, analysts had flagged the chances of a U.S. trade agreement after Britain clinched a free trade pact with India earlier in the week.

Last week, Trump said he has "potential" trade deals with India, South Korea and Japan.

"The market is running with the idea that any trade deal is good news, because it provides a certain degree of clarity and could provide a template for others to follow," said Rodrigo Catril, senior FX strategist at National Australia Bank.

At the same time, a British trade deal is considered among the easier negotiations, while talks with Europe and particularly China are expected to be more complicated, he said.

"The devil will be in the details," Catril said. "These deals are not going to come for free."

Investors will watch closely for any signs of thaw when U.S. Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer meet China's economic tsar, He Lifeng, on Saturday in Switzerland.

Trump suggested on Wednesday that Beijing initiated the talks, and said he was not willing to cut tariffs on Chinese goods to nurture negotiations.

The dollar edged up 0.1% to 7.2368 Chinese yuan in offshore trading CNH=D3.

It rose by a similar margin to 143.96 yen JPY=EBS and 0.8246 Swiss franc CHF=EBS.

The euro EUR=EBS was flat at $1.1303, following a 0.56% decline on Wednesday that was its biggest in two weeks.

The dollar started Thursday on the front foot, a day after the Fed warned of rising risks to the economy from higher inflation and unemployment.

The Federal Open Market Committee (FOMC) left interest rates unchanged, as widely expected, but Fed Chair Jerome Powell said it is not clear if the economy will continue its steady pace of growth or wilt under mounting trade uncertainty and a possible spike in inflation.

"It's not at all clear what the appropriate response for monetary policy is at this time," Powell said.

Markets currently price three quarter-point rate cuts by year-end, with the next coming in July or September.

"The FOMC does not want to pre-empt changes in the U.S. economy - it wants to wait for 'hard' economic data to guide its policy actions," said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia.

"From here, we expect communication from Chair Powell and other FOMC members to focus on making sure inflation expectations are anchored," he said. "There is a risk public statements lean hawkish."

The U.S. dollar index =USD, which measures the greenback against six major peers, was flat at 99.877.

Along with the BoE, Sweden's Riksbank and Norway's Norgesbank announce policy decisions later on Thursday, with both expected to keep interest rates on hold.

The Swedish crown SEK= edged up 0.1% to 9.6466 per dollar.

Norway's crown NOK= slipped 0.2% to 10.3530 per dollar.