The U.S Dollar had its best day in almost 2 weeks yesterday as expectations for interest rate hikes increased off the back of yesterday’s inflation release. The Dollar also benefitted from its renowned safe-haven status as both The U.S and Iran currently remain deadlocked.
Yearly inflation figures for April reached their highest levels since May 2023, hitting 3.8%, whilst core inflation climbed to 2.8%. Contributing factors to the inflation increase were largely down to the surge in Oil Prices off the back of the Middle Eastern conflict. Airline fares also continued to show strong price growth, and this is expected to continue into the summer months, especially with many airlines forecasting Jet Fuel problems, and the possible knock-on effect to airfares as a result of this. Odds of interest hikes in the latter part of the year have ultimately ticked up since the release of the inflation report.
Moving focus to the Middle East, signs of progress seem to be hitting a stumbling block as Trump told reporters earlier this week that a ceasefire between the parties involved was on massive life support after rejecting Iran’s response to the American peace proposal.
Switching now to The UK, The Pound has climbed just under 0.5% against the Euro and is pretty much unchanged against The Dollar this morning. The particular rise against the Euro has come from political and market uncertainty easing slightly regarding a potential leadership challenge. Although more than 80 members have now called for Starmer to go, there seems to be a lack of candidates being presented currently and therefore The Pound is taking advantage.
Regarding economic data today, the main focus will be on Producer Inflation prices in The U.S. Producer prices are expected to hit 4.3%, up from 3.8% which would ring the alarm bells, especially after yesterday’s 3 year-high in Consumer Prices. Whether today’s figure comes out as expected, or slightly higher, US Dollar strength as a result is pretty much guaranteed. Along with the odds of interest rate hikes climbing further, and even potentially coming sooner.
GBP/EUR 1.1540 GBP/USD 1.3521 GBP/AED 4.9664
GBP/AUD 1.8682 GBP/CHF 1.0564 GBP/CAD 1.8529
GBP/NZD 2.2792 EUR/USD 1.1700 GBP/ZAR 22.2502