* Pound traders lock in profits before British election
result
* Trump to meet advisers on China tariffs
* Dovish Fed message sees dollar touch lowest since August
* Treasury yields up in Asia, Europe
* No change from ECB at Christine Lagarde's first meeting
* Turkey and Ukraine both slash interest rates by 200 bps
* Wall Street expected to open flat to slightly lower
By Marc Jones
LONDON, Dec 12 (Reuters) - World shares took another run at
record highs on Thursday, as the right messages from the U.S.
Federal Reserve set traders up for a packed day of central bank
meetings and a Brexit-defining election in Britain.
The Fed kept U.S. interest rates unchanged, as expected, but
it was a message that it would take an unexpected and
"persistent" rise in inflation to lift them again that cheered
the bulls and pushed the dollar to its lowest since August.
Asian shares rallied almost 1% overnight, despite reports
Washington will press on with new China tariffs. European
trading left MSCI's broadest world share index .MIWD00000PUS
just 0.1% shy of its 2018 record high.
"This is quite a strong signal that current interest rates
will remain at these low levels for the time being," Mirabaud's
chief economist, Gero Jung, said of the Fed, the European
Central Bank and Switzerland's SNB which had also kept rates
steady.
"And we have a modest cyclical improvement in the economy,
so that is good for risk assets."
It was the start of a series of events over the next few
days likely to set the course of financial markets for months to
come.
Sterling weakened from its highest in more than two years
versus the euro and an eight-month high versus the dollar with
voting underway in an election that will determine whether
Britain exits the European Union next month.
Expectations are that the ruling Conservatives, led by Boris
Johnson, will gain a majority that allows his stalled Brexit
deal to be passed by a new parliament, but the latest polls have
shown the lead shrinking. Exit polls for Britain's election will begin around 2200
GMT, after voting closes. Whether there will be a clear winner
or another hung parliament is likely to emerge between 0400 GMT
and 0600 GMT. Following a 10% surge by the pound in the last few months,
traders are now hedging their bets. Peter Kinsella, Union
Bancaire Privée's global head of forex strategy, said a
Conservative majority remained his expectation, however.
"We think a move to levels of around $1.35 or even $1.37 is
entirely feasible," if there is a Conservative majority. With
another hung parliament "you are definitely back down to
$1.26-1.27."
The pound was last down 0.2% at $1.3170 GBP=D3 just off
its March highs and near a May 2017 peak against the euro at
84.49 pence EURGBP= .
THE NEW LAGARDE
The euro EUR=EBS held at $1.1135 as Christine Lagarde kept
the ECB's sub-zero interest rates steady at her first meeting as
president of the European Central Bank.
Her first post-meeting press conference was being closely
watched, especially with the bank also updating its economic
forecasts and due to make changes to its policy framework next
year. "The scope of the strategy review may not be finalised
before early 2020, but it should be centred on four main issues:
the definition of price stability and the inflation measures;
the side effects of unconventional policy measures; the internal
and external communication strategy; climate risks," said
Frederik Ducrozet at Pictet Wealth Management.
Switzerland's central bank also kept its policy ultra-loose
and reaffirmed that negative interest rates would remain central
to its plans. The Swiss franc was little changed. Turkey slashed its main rate 200 basis points to 12%.
Ukraine also cut its key rate 200 bps, to 13.5%. Meanwhile, U.S. President Donald Trump is expected to meet
top advisers on Thursday to discuss tariffs on nearly $160
billion of Chinese consumer goods that are scheduled to take
effect on Dec. 15, three sources told Reuters. Trump is expected to go ahead with the tariffs, a separate
source told Reuters, which could scuttle efforts to end a
17-month trade war between the world's two largest economies.
The dollar index .DXY against a basket of six major
currencies fell to a four-month low of 97.057, but spent most of
the European session regaining ground.
Treasury yields had also fallen in reaction to the Fed's
comments, but they recovered, too. Yields on the benchmark
10-year Treasury US10YT=RR reached 1.7966 before what was
expected to be subdued Wall Street opening. .N
In commodities, U.S. crude CLc1 edged up 0.4% to $59 a
barrel and global benchmark Brent LCOc1 rose 0.5% to $64 per
barrel. A report by OPEC released on Wednesday suggested that
oil markets are tighter than previously thought. Traders also watched as shares of newly floated Saudi state
oil company Saudi Aramco rose 4.5% 2222.SE and its valuation
touched $2 trillion, its debut on the Riyadh stock market on
Wednesday.
Sterling vs. odds of Conservative majority in 2019 election https://tmsnrt.rs/2YHhmpw
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