Pound stumbles at start of testing week

Sterling weakened against the US dollar and the euro at the start of a jampacked week featuring significant economic, political and central bank events.

Before all of that, the energy crisis was once again the big story on Monday. The weekend pause in hostilities to provide space for fresh negotiations between the United States and Iran led to a drop in the price of the key oil indexes. However, this positive development was undercut by the suspicion that peace, as well as the resumption of normal shipping traffic, would be hard to come by.

The UK and sterling are waiting for Thursday’s Bank of England interest rate decision with a sense of unease. Andrew Bailey and co are expected  to keep rates on hold, but there is a growing sense that the interest rate trajectory has to be up given recent events and rising oil prices.

All the while, Andy Burnham continues to bed in as the latest prime minister. Financial markets might have been glad to hear him discuss the need to bring the welfare bill down yesterday, although reported plans to tweak school curriculums to bridge the skill gap between education and the workplace will likely face barriers.

In the world of economics, American durable goods orders increased by 0.3% in June after a major slump the month prior. That was still well below the 2% uptick forecast by a panel of economists and was dragged down by a big fall for transportation machinery.

The calendar is a bit light across today and tomorrow, but that all changes to end the week. Eurozone inflation and GDP data, along with the latest American growth estimates arrive before the end of Friday, meaning we could see some significant exchange rate movements before the week is out.