A more positive tone swept through currency markets on Monday, the gathering of several of the key players in the Middle East conflict at the UN General Assembly raising hopes that a deal (or perhaps a string of deals) could be struck.
There wasn’t much concrete to back up this optimism, it must be said. President Trump indicated that he ‘may be’ interested in meeting Iranian officials, but even that relatively glib comment failed to stop the price of oil cooling for the fourth trading day in a row. Sterling ended the day slightly weaker against the US dollar and more or less unchanged against the euro.
Bonds meanwhile continued to rally, easing the pressure on a number of global economies and governments. This will have been particularly welcome news in Washington and London, both of which face key political set pieces in the form of the midterm elections and the autumn Budget in the coming months. However, it is increasingly clear that their fortunes are fundamentally tied to volatile energy prices.
There wasn’t a lot of data to examine yesterday, but we did hear consumer confidence in the UK labour market this month sank to its lowest level in almost four years.
Beginning today, the UN meetings in New York should provide a healthy dollop of political intrigue. China’s Xi Jinping will meet Trump or a summit on Thursday, with much made of potential collaboration on AI safeguarding following recent security fears.
The key focus of the week will still be on oil. With brent crude having fallen by close to 10% in the last ten days, it feels very much a make-or-break moment for energy prices as we march ever closer to winter.
GBP: Borrowing balloons ahead of Budget
UK public sector net borrowing came in at close to £19bn in August, the highest for that month since 2020 and smashing forecasts in the £15bn range. This morning’s announcement comes just over a month out from the autumn Budget, where new chancellor John Healey has to contend with tight funding conditions along with new spending commitments.GBP/USD: the past year
EUR: Disaster for Merz
There was more pain for Friedrich Merz and his beleaguered Christian Democrats (CDU) in regional elections over the weekend. The German chancellor described defeats in the country’s West and East as a ‘disaster’ but pledged he would fight on. The latest setback for the political establishment destabilised the euro on Monday, although small volumes helped limit losses.GBP/EUR: the past year
USD: More tough talk from Fed
The Federal Reserve’s Austan Goolsbee backed up a hawkish meeting last week in a speech on Monday. Goolsbee claimed policymakers may have to be willing to cause economic pain on account of persistent price pressures linked to the war in the Middle East. The US dollar strengthened across the board yesterday, picking up from its strong end to last week.USD/GBP: the past year
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