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Sterling outperformed the euro last week as the rumblings in Westminster died down for now.
Sterling picks off after the long weekend close to its best level against the euro in over two weeks. The mood in currency markets had been galvanised by the apparent progress in negotiations between the United States and Iran over the weekend. Nothing has been agreed yet and another round of military strikes is further proof of just how difficult it will be to end the war.
The economic data that arrived last week was mixed for the pound. Inflation fell and wage growth slowed, but a significant decline in retail sales and higher unemployment mean that the Treasury won’t be declaring victory just yet.
After bank holidays in both the United Kingdom and the United States, this week starts with quite a light schedule, with a second estimate of American GDP growth on Thursday probably the pick of the action from a data perspective.
That being said, currency markets still have plenty to evaluate, not least any potential updates from the world’s most talked-about stretch of water in the Middle East. Two oil tankers were able to cross the Strait of Hormuz and the brent crude index tumbled to it’s lowest level in a month on Monday evening before nudging back towards $100 per barrel this morning. Last week, the International Energy Agency (IEA) warned that global oil stockpiles will soon be at risk of running dry.
As millions of motorists hit the road to visit friends and families across these sun-kissed isles, more than a few will no doubt have been watching the costs at the pump. The Iran war has sent petrol near record highs, with the Office for National Statistics declaring sales of fuel fell by 10% in April, a major factor in declining retail sales volumes.
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GBP: Playing by the rules
Sterling had a better week last time out thanks largely to the political crisis quietening down for the moment. Another factor was Andy Burnham, the man best placed to succeed Keir Starmer in any prime ministerial race, pledging to stick by fiscal rules. Government borrowing costs fell from a 30-year peak in response.GBP/USD: the past year
EUR: Decent data fails to lift euro
Germany reported some relatively strong economic news on Friday, but that wasn’t enough to lift the euro from multi-week lows against the pound and the US dollar. The Middle East conflict is having an effect, but more economic releases on Friday will also shape things this time out.GBP/EUR: the past year
USD: The Warsh era begins
As of Friday afternoon, Kevin Warsh is officially the new governor of the Federal Reserve. Some interesting research before the bank holiday showed how a new governor’s initial tenure is marked by volatility as markets get a feel for the new person at the helm. Warsh will be hoping things stay calm and allow him to cut rates before long.USD/GBP: the past year
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