UK Inflation provided some relief this morning as prices rose 2.8% in the 12 months to May, despite expectations Inflation would rise to 3%. Transport saw the largest contribution, with air fares jumping 10.3% between April and May, whilst food and non-alcoholic drinks prices fell to 2.2% – notably its lowest levels since December 2024.
In usual circumstances we could expect The Bank of England to start considering interest rate cuts if inflation starts to fall or remains steady, however with Services Inflation climbing by 0.5%, this could provide The Bank of England with more cautiousness moving forward.
After 4 days of losses, The US Dollar has held ground as investors await further details on a U.S – Iran peace agreement, as well as Federal Reserve’s Kevin Warsh’s first-interest rate meeting. Expectations across the board suggest interest rates will be left unchanged, with attention turning to economic projections.
Last night we started to get drip-fed the finer details of the U.S – Iran peace deal, with emerging details showing that Iran would be allowed to immediately resume oil exports. Regarding the nuclear negotiations, Iran have supposedly agreed not to pursue or acquire nuclear weapons and will also freeze any further expansion of its nuclear programme throughout the 60-day negotiations.
Turning our attention to economic data, first up we have Eurozone Harmonized Inflation, which is the European Central Bank’s standard measurement. Crucially, prices paid by households are set to stay unchanged at 2.5% which again would provide the European Central Bank with some relief. If there proves to be any deviation from these figures, then we could expect to see some Euro swings.
Rounding the afternoon’s economic data off, we have US Retail Sales for May which as it stands could well be a non-event with figures expected to come out unchanged. It should be noted however, that the main U.S drivers are currently the pending U.S – Iran peace deal and this evenings interest rate meeting.
GBP/EUR 1.1547 GBP/USD 1.3402 GBP/AED 4.9246
GBP/AUD 1.8991 GBP/CHF 1.0613 GBP/CAD 1.8767
GBP/NZD 2.3056 EUR/USD 1.1591 GBP/ZAR 21.7739