Sterling strengthened against both the euro and the US dollar across Monday, reversing a bruising stretch that saw it fall to its worst level in a month to end last week.
After a frantic morning session to open the week, global markets were somewhat calmed by reports Iran and the United States were exchanging new variations of peace deals. Although none of these seem close to being mutually accepted, the price of oil and the cost of government debt, which had risen to its highest level in almost 30 years here in the UK last week, at last started to ease.
The International Monetary Fund (IMF) did provide the UK government with some vindication for its plan to reduce debt. Repeating last year’s warning that the UK may ultimately have to consider scrapping the pension triple lock, analysts highlighted the need to make “difficult fiscal trade-offs”. Current plans to reduce the deficit were appropriate, those same analysts thought.
Andy Burnham’s campaign to stand in the Makerfield by-election picked up speed to start the week. This was slightly awkward timing, given the Greater Manchester mayor has previously advocated for a less rigorous commitment to defined fiscal rules. Meanwhile, Keir Starmer insisted he wasn’t going anywhere and that no formal leadership process had been begun.
Oil and energy remain significant question marks for the global economy, and there wasn’t exactly a clear resolution on Monday. The International Energy Agency warned that global stockpiles were dwindling fast and may only last a few more weeks. Overnight, Donald Trump claimed that he had paused a planned strike on Iran while his government considers the latest peace plan from Tehran.
The week ahead is an extremely busy one for economic data. The UK alone will hear key reads on inflation and the retail sector, while the US dollar is set to be affected by the Federal Reserve’s most recent meeting minutes.
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GBP: Unemployment ticks up
The UK’s unemployment rate increased slightly from 4.9% to 5% in the three months to March. Average earnings including bonuses increased by more than expected, although the rate of pay rises was in line with expectations if you take bonuses out of the equation. The energy crunch, near-record government borrowing costs and an unfolding political crisis mean the pound is still under significant pressure.GBP/USD: the past year
EUR: Higher against the dollar
The euro brushed off some losses against the pound to strengthen by close to half a cent against the US dollar on Monday, which continues to suffer from its proximity to geopolitical concerns.GBP/EUR: the past year
USD: Warsh enters to bond tremors
Before he’s even had a chance to take a seat at the Federal Reserve, Kevin Warsh is being presented with a sizeable policy challenge. Yields on US government debt have put the US dollar under pressure and raised questions of whether the Fed can afford not to raise rates. Lower interest rates are a key requirement of the White House, you may recall.USD/GBP: the past year
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