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The UK headed to the polls to select local council members yesterday.
Labour is on course to lose more than two-thirds of its local council seats after the early results of yesterday’s elections pointed to a breakthrough for Reform UK at the expense of traditional political powers. Sir Keir Starmer’s future as prime minister now hangs in the balance.
As the results began to trickle in this morning, sterling started the day on the front foot while government borrowing costs climbed again. As is usually the case at times like these, the recriminations and maneuvering could drag on for weeks, raising the possibility of another damaging period of upheaval and uncertainty.
Thursday proved a triumphant night for Nigel Farage’s Reform, which at the time of writing had claimed almost 300 seats with only about a quarter of councils declared. The big question is what comes next. Will these results provide adequate cover for Labour MPs to say enough is enough? Only time will tell.
Away from politics, we just heard that UK house prices declined by an annualised rate of 0.1% in April. That data comes courtesy of Halifax’s monthly survey, which noted the housing market’s relative resilience to higher mortgage rates and economic uncertainty.
While the UK is very much distracted by domestic politics this morning, financial markets are still focused primarily on the war in the Middle East. The price of oil eased earlier this week as hopes of a peace agreement spread. However, there was some clear escalation overnight with the US launching strikes on Iran in response to its targeting of American ships. Despite claims to the contrary, it’s still hard to see a diplomatic path forward at this moment.
Should the war continue, surging fertiliser costs could have a dramatic effect on food prices across the world next year, a new report predicted. Supply of agriculture’s most vital commodity has been throttled at the Strait of Hormuz for over two months, sending prices as much as 50-70% higher.
Yesterday was a quiet day for economic data, but there are still a couple of significant releases from across the Atlantic due to come out this side of the weekend.
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GBP: Threats from all angles
Yesterday’s local elections represent another threat to the pound’s standing as we towards the summer. Borrowing costs have shot up in recent weeks, casting doubt on the prospects of economic growth just as the Iran war provided a major shock. To top it all off, the possibility Britain could have another prime minister before long is likely to have a significant impact.
GBP/USD: the past year
EUR: Imports surge
Germany’s trade surplus slumped from €19.6bn to €14,3 bn in March. While exports held up better than expected (particularly to EU member nations), imports soared to their highest level in over four years, with China and the United Kingdom the beneficiaries.
GBP/EUR: the past year
USD: Big day for the dollar
You could forgive currency markets for being a bit distracted by the war in the Middle East, but today’s data schedule might prove harder to ignore. Unemployment data arrives just after a key jobs report and just before the University of Michigan’s closely watched consumer pulse check.
EUR/USD: the past year
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