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Inflation hit 3.3% in the United Kingdom in March.
Headline UK inflation shot up from 3% to 3.3% in March, the highest level in three months and underscoring the highly disruptive impact the Iran war is having on the British economy. Transport costs (including motor fuels) increased by 4.9% from February, the fastest rate of increase since December 2022.
The Bank of England’s next interest rate decision, which we’re set to receive a week from tomorrow, will no doubt be framed by this information. Markets are currently pricing in a three-way voting split after the Monetary Policy Committee, in a rare display of unanimity, opted to keep rates on hold last month.
Sterling was supported on Tuesday by the seventh largest monthly fall in headline unemployment since 1971. Despite that positive news, sterling weakened slightly against the US dollar, although it did pick up about a quarter of a cent at the euro’s expense.
Olly Robbins claimed Downing Street had pressured him to approve Peter Mandelson as US ambassador. Yesterday’s testimony from the Foreign Office official at the centre of the scandal wasn’t a good look Number 10, but there wasn’t enough damaging material to further threaten the prime minister’s wobbly position.
The United States announced an extension to the two-week ceasefire in the Middle East that was due to expire today. Donald Trump talked up the prospects of a “great deal” even as Iran refused to commit to attending planned peace talks and attacked a container ship overnight. The price of oil eased slightly to below $100 per barrel this morning.
American retail sales increased by a sharp 1.7% in March, driven almost exclusively by higher gasoline prices. The increase from the prior month’s 0.7% was the steepest growth in over a year, helped by pretty solid consumer spending despite the impact of the war.
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GBP: More proof needed
An unexpected drop in unemployment in February is a reassuring snapshot of economic resilience, but economists were quick to suggest we shouldn’t read too much into it. Labour force participation is falling (including among young people) and self-employment is on the up, so the omens aren’t all great for the pound.
GBP/USD: the past year
EUR: Sentiment hits three year low
As expected, the German ZEW economic sentiment index plunged in April, although it actually underperformed even those relatively gloomy projections. Consumers reported their lowest level of confidence since late 2022, which makes for an interesting backdrop to next week’s interest rate decision.
GBP/EUR: the past year
USD: A glimpse of the future
Kevin Warsh appeared before a key congressional hearing on Tuesday hoping for a speedy approval by the Republican chambers. His proximity to the White House was very much under the spotlight, with many investors worried he may be swayed by the political wind. Current governor Jerome Powell’s term comes to an end in mid-May.
EUR/USD: the past year
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