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The United States and Iran are set to sign a deal that would reopen the Strait of Hormuz.
The United States and Iran are due to sign a deal to reopen the Strait of Hormuz and extend their fragile ceasefire before the week is out, news that fuelled a rally across the global economy on Monday.
After a string of false starts, this weekend’s diplomacy provided the clearest sign yet that all parties would commit to a workable peace deal. But the pound missed out on the rally that resulted, its mixed performance on Monday a reminder that it now bears the brunt of the risk ahead of Thursday’s pivotal Makerfield by-election.
That vote has cast a long shadow over the pound for some time. Should Andy Burnham prevail on Thursday, he is likely to launch a formal leadership bid against Sir Keir Starmer. The fact this vote comes the same day as the latest interest rate decision from the Bank of England is just the icing on the cake.
An end to the energy crisis would be a major boost for the British economy, although sizeable questions remain around the contents of the deal and the pace at which shipping flows will return to pre-war levels. At any rate, the memorandum of understanding is not due to be signed until Sunday – too late for this week’s G7 summit participants to get a look at the finalised text.
Nevertheless, oil plunged by 4% and stock markets started proceedings in fine fettle. Part of this was down to residual excitement from Friday’s initial public offering from freshly minted trillionaire Elon Musk and SpaceX, a historic launch that took the company close to a $2 trillion valuation as of yesterday afternoon.
Overnight, we had a pair of interest rate decisions from the Bank of Japan and the Reserve Bank of Australia. The Bank of Japan announced a quarter point hike to take borrowing costs to their highest level since way back in the 1990s. Australian policymakers left the base rate on hold.
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GBP: Missing out
While financial markets were in full rally mode to start the week, the pound was unable to make any inroads at the expense of its major rivals. A busy week in the UK sees some key data arrive from tomorrow morning, before a massive Thursday that could ultimately result in a new prime minister.GBP/USD: the past year
EUR: In the nick of time
Hot off the heels of its first rate hike in several years, European Central Bank (ECB) president Christine Lagarde reacted with relief to news of a diplomatic breakthrough in the Middle East. It was a timely agreement, as Europe is beginning to see the second round of effects from the energy crisis, Lagarde said.GBP/EUR: the past year
USD: Factory blip stalls momentum
The US dollar had been building up a bit of steam, but more downbeat numbers from a couple of minor manufacturing reports slowed momentum on Monday. The Federal Reserve has now entered its blackout period ahead of Kevin Warsh’s media debut as chair tomorrow evening and the dollar will be subject to intense scrutiny ahead of that.USD/GBP: the past year
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