(Adds comments by Fed’s Clarida, updates prices)
* British parliament to vote on Brexit deal on Saturday
* Fed’s Clarida pledges to support economy
* Fed seen likely to cut rates this month
By Karen Brettell
NEW YORK, Oct 18 (Reuters) - U.S. Treasury yields fell on Friday as investors awaited a UK vote on Britain’s deal to leave the European Union this weekend, and after a senior Federal Reserve official said the U.S. central bank will act as appropriate to sustain economic expansion.
British Prime Minister Boris Johnson secured a Brexit deal with the EU on Thursday but parliament must approve it in an extraordinary session on Saturday to pave the way for an orderly departure on Oct. 31.
If the agreement does not pass, the country may face a disorderly EU exit that would have an adverse impact on investment and economic growth.
The absence of an agreement would likely dent risk appetite and boost demand for safe haven U.S. bonds.
“The bigger picture is just headlines, especially Brexit and the vote tomorrow,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York.
Benchmark 10-year notes gained 3/32 in price to yield 1.745%, down from 1.755% on Thursday. The yield rose as high as 1.799% after the Brexit deal was announced on Thursday.
Federal Reserve Vice Chairman Richard Clarida on Friday reiterated his stance that the central bank will “act as appropriate” to extend the U.S. recovery and shield the economy from risks posed by geopolitical tensions and slowing global growth.
Interest rate futures traders are pricing in a 90% likelihood of a cut this month, according to the CME Group’s FedWatch tool.
Data on Wednesday showing that September U.S. retail sales fell for the first time in seven months adds to the case that the Fed is likely to cut rates at the conclusion of its meeting on Oct. 29-30.
“The retail sales was weak enough to really solidify at least a cut this month,” Lederer said.
Investors are also focused on whether the United States and China will reach a deal to end their protracted trade war, which has been blamed for harming global growth.
Data on Friday showed that China’s third-quarter economic growth slowed more than expected to its weakest pace in almost three decades as the bruising U.S. trade war hit factory production, boosting the case for Beijing to roll out fresh support. (Editing by Susan Fenton and Richard Chang ) )