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The price of oil surged and sterling weakened as markets watched and waited for news from the Middle East.
Pakistan’s military chief is in Tehran today. That might sound a long way from the pound, the euro or your exchange rate – but his mission is as close to good news as markets have seen in weeks: a fresh round of talks aimed at extending the Iran ceasefire before it expires next Tuesday.
That six-day countdown is driving everything at the moment. The pound is close to its strongest level against the dollar since mid-February. Oil has pulled back from its recent peaks. The mood is cautious, but noticeably better than it was a week ago – and if you have been waiting for a more favourable moment to buy euros for a property purchase, send money abroad or convert savings, it is worth paying attention to how this week unfolds.
This morning brought fresh data on the UK economy. The Office for National Statistics published its monthly gross domestic product (GDP) figure for February – the last snapshot before the Iran conflict muddied the picture. January was flat, so markets are hoping February shows a bit more life underneath. It matters because the Bank of England meets on 30 April and whatever this number says feeds directly into what policymakers decide about interest rates.
The International Monetary Fund had something eyebrow-raising to add yesterday. Having already cut its UK growth forecast earlier this week, it turned its attention to government borrowing around the world – warning that combined global public debt will hit 100% of global economic output by 2029. The United States, it said, is on course for one of the heaviest debt loads of any major economy. That is a meaningful part of why the dollar has been falling. When the IMF publishes a report pointing a finger at American finances, traders take note.
Two things to watch in Europe this afternoon. Eurostat confirms the final inflation figure for the eurozone in March, and the European Central Bank releases the internal notes from its March meeting. Those notes will show, for the first time, exactly how Frankfurt’s rate-setters debated the oil shock behind closed doors – and whether any of them pushed for a rate rise. The answer matters if you are planning a property purchase on the continent or sending regular payments to Europe.
Across the Atlantic, a run of US economic data arrives this afternoon, including weekly unemployment figures and a manufacturing survey from Philadelphia. The head of the New York Federal Reserve also speaks this morning before America’s central bankers go into their pre-meeting silence. The Fed almost certainly will not cut rates at the end of the month. The more interesting question is whether any of them are seriously discussing going the other way.
Mark Wednesday 22 April in your diary. That is when the UK publishes its first inflation figures for March – the first real evidence of how quickly the energy shock is feeding through to everyday prices. It is also the day the ceasefire is due to expire. Both will move the pound.
Make sure any upcoming currency transfers are protected against sudden market moves. A forward contract lets you fix your exchange rate today for a transaction in the future. Call your account manager on 020 7898 0541 to find out more.
GBP: GDP in, rate debate quietly shifting
February’s growth figure is the last clean measure of how the UK economy was doing before the Iran conflict added a new layer of pressure on energy bills and the cost of living. The Bank of England meets on 30 April and a rate cut is firmly off the table – but the question, slowly and seriously, is becoming whether rising costs are bad enough to push policymakers in the opposite direction. UK inflation for March arrives on Wednesday 22 April and will be the clearest signal yet.
GBP/USD past year
EUR: ECB opens its books
The European Central Bank publishes the internal notes from its March meeting this afternoon – the first detailed look at how rate-setters in Frankfurt debated the oil shock behind closed doors. The final eurozone inflation figure for March confirms prices rising at 2.5%, the highest in over a year, with energy leading the way. The ECB meets again on 29–30 April.
GBP/EUR past year
USD: Dollar at its weakest since February
The dollar has been sliding all week and is now at its weakest against the pound since mid-February. Ceasefire optimism has stripped out some of the safe-haven demand that had kept it elevated, and soft US inflation data has removed the argument for higher rates. For anyone thinking about a dollar-denominated purchase – US property, university tuition or regular transfers – this is a more favourable window than it was a week ago, though the picture could shift quickly if Tuesday’s ceasefire deadline passes without a deal.
USD/GBP past year
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