It was a positive day for the pound yesterday which dodged a couple of potential risks. While it weakened initially against the euro, sterling then thought better of it, remaining at the upper reaches of where it has been becalmed since last July. This remarkable stability was helped yesterday by the Prime Minister escaping a potentially disastrous enquiry on claims that he misled parliament over the Mandelson affair. Friendly words from President Trump on the King’s state visit to Washington also added to a more relaxed political vibe.
While recent ups and downs against the US dollar have been more pronounced, GBP/USD also remains well above the average of the past year and close to 2% up on where it started the month.
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An interest rate hold from the Bank of England (BoE) looks increasingly likely when the Monetary Policy Committee (MPC) speaks tomorrow. However, recent votes suggest it is unlikely to speak as one, and there will be much attention paid to how the committee votes and what that means for subsequent decisions this spring and summer.
Ahead of the MPC vote tomorrow, a run of recent data has shown the UK economy less bothered by the war in Iran and oil price rise than might be expected. And following falling unemployment last week and a positive mood from business according to PMI surveys, this morning shop price inflation in April was announced as just 1% and not the 1.5% predicted. Source of the data, the British Retail Consortium (BRC), was keen to downplay the good news, saying that retailers were simply limiting price rises to stimulate demand in troubled times: “While we’re yet to see the full force of the Middle East conflict feeding into consumer prices, it will not be long before it begins to,” said BRC Chief Executive Helen Dickinson.
After a run of price rises that have taken it back to $100 per barrel, Brent Crude dropped slightly yesterday. The bigger news was that the UAE has left OPEC, the oil producers’ group that limits the supply and hence the price of oil. If the UAE pumps more oil than before that could cut the price, but only if it can get it past Iran.
For now it’s all eyes on the central banks as US Federal Reserve Chair Jerome Powell bows out.
