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The pound remained at or close to its best for ten months against the euro yesterday and close to its two-month high against the US dollar. The backdrop was risky however, with UK borrowing costs hitting their worst for 28 years.
Those bond yields had risen because of the increasing feeling that the prime minister’s days will be numbered following tomorrow’s local election where his Labour Party is expected to be all but wiped out.
We should have a better feel for this on Monday, but in the meantime sterling strengthening on the back of a worsening economic position for the UK is a risky proposition – as those who were exposed to currency risk during the Liz Truss mini-Bidget debacle will remember. In November 2022 GBP/USD suddenly weakened to multi-decade lows.
The other big number of interest is the oil price. This has fallen from the highs of last week but Brent Crude remains at around $110, as the shaky ceasefire in the Middle East continues but very few ships are moving through the Straits of Hormuz.
Datawise we got two interesting results yesterday. For the USA the jobs market showed more resilience to the oil shock than expected, with more new job openings than expected. Will that result be supported by the more influential Non-Farms Payrolls on Friday?
In the UK, new car sales rose in April by 24%. This seems to fly in the face of consumers being unnerved by an impending cost of living crisis, until you bear in mind that electric vehicle sales rose by 59%.
We will shortly get a measure of business mood – globally – with final results for the Purchasing Managers Index (PMI).
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your Business Account manager on 020 3918 7255 to get started.
GBP: Pound faces down leadership fears
Sterling has eased as the week begins, slipping back against both the euro and the US dollar. The immediate driver is the global mood following higher oil prices which leave the pound exposed. As well as the local council elections this week, we have a final result for services PMI following a rise in positivity in the early readings that left the markets baffled.GBP/USD: the past year
EUR: Euro treads water as drama unfolds elsewhere
The powerlessness of the EU to influence events in the Middle East, and the risks they pose to the industrial powerhouses of Europe, has helped keep the euro in reactive mode lately. PMI data coming out shortly will give a clue to European business worries, but the possibility of interest rate hikes is back.GBP/EUR: the past year
USD: Dollar dives as oil price recedes
The US dollar was on the back foot yesterday, losing across the board. It's hard to keep up with the ups and downs of the ceasefire over Iran and how that is affecting the Straits of Hormuz, and hence the US dollar, but the data from the US economy continues to surprise on the upside. Yesterday, JOLTs job openings were more positive than expected, while ISM Services PMI remained strongly positive at 53.6.USD/GBP: the past year
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