The pound fell against the euro and US dollar for the second consecutive week last time out, having been buffeted by weak data and shifting central bank expectations. American airstrikes on Iranian nuclear facilities over the weekend mean Monday begins with an air of genuine anxiety as currency markets await the next stage in a conflict some analysts fear is spiralling out of control.
June has proved a serious challenge for the pound. Since the beginning of the month, GBP/EUR has weakened by 2 cents. GBP/USD sits only just below its 1 June level but has ranged by almost 3 cents in that time, a testament to the volatile market mood.
Over the weekend, Donald Trump took the decision to assist Israel with “bunker buster” bombing raids in Iran. The president had previously given Iran a two-week window to strike a deal. The Iranian parliament immeditaely voted to close the Strait of Hormuz in response, through which a vast percentage of global oil tankers flow. The price of Brent crude oil hit a five-month high in volatile trading this morning.
It’s worth emphasising the startling fall in May’s UK retail sales figures again. Across the country, sales fell by 2.7% month-on-month – the steepest monthly drop since December 2023. That news came hot on the heels of Thursday’s interest rate decision from the Bank of England, and Andrew Bailey used the press announcement to highlight his concerns about the strength of the labour market.
Borrowing costs are clearly affecting consumers in other ways, too. The average annual percentage rate (APR) on British credit cards hit a record high of 35.7% in the past three months, according to spending tracker Moneyfacts UK. The average credit card debt per household is now estimated to sit above £2000.
We’re heading into a quieter period in terms of economics, but dynamics will once again be influenced by geopolitics. On that note, keep an eye out for this week’s NATO summit in The Hague, where delegates will certainly have plenty to discuss.
This morning sees the release of the S&P’s preliminary UK services and manufacturing report for June. German inflation data will arrive later this afternoon.
After last Thursday’s Juneteenth holiday, US markets will be greeted with a rather busier schedule. The pick of the bunch comes with the core PCE price index, a report often cited by the Fed in setting rates.
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