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Another wearying chapter in the oil crisis began on Monday.
The pound strengthened sharply yesterday against a US dollar in retreat as a ‘risk on’ mode seemed to take hold of the markets.
It followed confusion over the supposed deal between the US and Iran, as the United States began a naval blockade of the Strait of Hormuz after peace talks disintegrated over the weekend. This sent the price of oil up by 7% and raised fresh questions around what comes next.
Can a deal be negotiated? Will the price of oil and gas keep rising? And, most importantly, how will this affect your budget between now and the summer?
Those are exactly the kind of questions our April-June Quarterly Forecast answers. The latest edition explores what the conflict means for your business, and why the UK economy could be uniquely exposed to the war’s impact.
For now, currency markets are squarely focused on the narrow shipping lane that has come to define the war. The price of oil climbed by more than 7% across Monday as traders gave a clear indication they didn’t see a quick end to the war or the supply squeeze. The output of oil-producing Opec nations fell by a record 27% in March alongside the crisis. That was despite nations including Saudi Arabia and Kuwait desperately sending oils in pipelines to alternative ports.
Back home, the latest data indicates the employment market remains rickety. Demand for staff fell at the slowest pace in months, but that could not mask slow pay growth and a finely balanced outlook for 2026.
However, overnight the British Retail Consortium (BRC) reported that UK retail sales increased 3.1% year-on-year on a like-for-like basis in March 2026, far above market expectations for a 0.9% rise. This was mainly attributed to an early Easter, with food sales rising nearly 7%.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 3918 7255 to get started.
GBP: Brushing off blockade
A day that started with the pound on the back foot was more than reversed. After a dicey opening, the pound clawed back the cent it had lost to the US dollar overnight and strengthened to a position above when the war with Iran started. It also ended the day slightly up on the euro. That success may prove to be more overconfidence than evidence, but retail sales data this morning shows there is still life in the economy. That will be tested on Thursday with GDP.
GBP/USD: the past year
EUR: Brussels embraces new era
European leaders were in party mood yesterday. The election of a pro-EU leader in Hungary has renewed hopes of new funding for Ukraine and liberal European projects. The euro was little changed on Monday after the results of Sunday’s election, even if Hungary’s forint surged 3% higher against major international currencies. Coming up today and tomorrow, more inflation data.
GBP/EUR: the past year
USD: Dollar plunges as low confidence hits
It was a sea of red for the dollar this morning, with losses of around 0.75% against the pound and euro and well over 1% against the Swiss franc. In the US economy, sales of existing homes plunged by almost 4% in March. According to analysts, this was chiefly the result of low confidence and high interest rates expectations, as well as the weak labour market. The US dollar’s support from safe-haven dynamics seem to be at an end for now. We’ll get the producer price inflation (PPI) reading this afternoon.
EUR/USD: the past year
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