It was a sea of red for sterling on the exchanges yesterday. Although the losses were small, against the euro they have been adding up.
This was despite, or even because of the geopolitical news being good yesterday. Oil price falls on the back of cooling Iran-USA conflict and OPEC supply increase provided welcome relief to the British and European economies, but maybe slightly more to the eurozone.
If the peace moves do continue it will be just in time, after the consultants EY warned that the UK faces recession next year unless the Straits of Hormuz open.
The next exchange rate test comes from the American jobs market, where today we will get a result for JOLTs job openings and on Friday Non-Farm Payrolls. These figures offer an early glimpse into whether American businesses are still looking positive and are hungry to hire. They could shape the mood around the US dollar for the rest of the week. A clear slowdown in demand for workers could strengthen the Federal Reserve’s case for a gentler approach to interest rates. Today’s vacancies report is only the opening act. Private-sector hiring figures and service-sector surveys arrive tomorrow, before Friday’s main US employment report provides the week’s biggest test.
Yesterday we got final Purchasing Managers Index (PMI) results for Manufacturing. The results were largely as predicted for Europe and the UK and still in positive, expansionist territory at 51.9 for the UK and 52.2 for Germany. That’s Germany’s best result for several years and suggests its businesspeople see the threats of oil prices and tariffs receding. However that is dwarfed by the USA’s 55.6, its best result since May 2022. We will get results for services PMI tomorrow.
GBP: Pound sits in the doldrums
With no major data releases to trouble the markets yesterday the pound was at the mercy of global mood and oil. Sterling made progress against the US dollar before falling away later in the day and while gently slipping against the euro, but it was all a bit listless. With little major UK data due today either, sterling will be relying on the American jobs figures and the wider market mood for direction.GBP/USD: the past year
EUR: Lower oil costs offer some breathing room
The euro strengthened against both the pound and the US dollar on Monday. Falling oil prices helped, as Europe remains particularly sensitive to sudden increases in imported energy costs. That relief could prove temporary. Markets will be watching whether the apparent diplomatic opening between Washington and Tehran survives closer scrutiny, as well as how today’s US employment figures reshape expectations for American interest rates.GBP/EUR: the past year
USD: Jobs data puts dollar on the spot
The US dollar began the week on the back foot as oil prices retreated and demand for defensive assets eased. Attention has now shifted to the strength of the American labour market. A fall in job vacancies could add to concerns that the economy is losing momentum. A stronger reading would complicate matters by giving the Federal Reserve another reason to stay cautious on interest rates. Either way, today’s figures could set the tone ahead of Friday’s more influential employment report.USD/GBP: the past year
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