By Matthew Boyle
Markets look to become increasingly volatile in the coming days, as comments from President Trump over the weekend have only added fuel to the fire in the ongoing conflict in the Middle East.
After previously setting numerous deadlines for Iran to agree to a ceasefire at the weekend, Trump released an expletive-laden post on his own Truth Social network stating that on Tuesday the US would bomb power plants and bridges unless Iran opened the strait of Hormuz.
This ultimatum from Trump ramps up the conflict considerably and it seems in the coming days we will either see a ceasefire, or widespread bombing of Iran by the US.
The conflict has had a significant effect on exchange rates as the ongoing rising cost of energy has shifted the position of the central banks, and in particular for the Bank of England who look highly unlikely to cut interest rates any time soon.
Whilst delaying interest rate cuts has helped the Pound, rising energy costs are doing the opposite, as we are affected relatively more than many other countries. As such the Pound has struggled the past weeks, slipping away from the recent 9-month highs seen and moving towards the lower end of its recent range. Whilst many feel this may be the bottom of the range, don’t rule out the Pound going lower especially with UK elections on the horizon now in May – political uncertainty may weigh heavy on the Pound.
But with higher interest rates helping the Pound as its higher returns attract foreign investment, the ongoing war and higher energy prices are somewhat a double-edge sword, helping the Pound whilst also hurting it.
This week we have relatively little data of note so expect markets to remain sentiment driven and largely focussed on how events in the Middle East play out in the coming days.
Predicting what President Trump is going to do next seems a but like trying to punch smoke at present, so trying to guess which way the rates will move is somewhat of a gamble. Should you have an upcoming transfer to make, speak to your currency consultant at A Place in the Sun Currency today for some friendly and professional guidance on how you can remove risk in what is an increasingly uncertain market, and make your money go further.
Data out this week
Tuesday
08.30 EUR PMI data
13.15 USD Employment change
13.30 USD Durable goods orders
Wednesday
10.00 EUR Retail Sales
19.00 USD FOMC minutes
Thursday
13.30 USD Consumption Expenditures & GDP
Friday
07.00 EUR German Index of consumer prices
13.30 USD CPI data
15.00 USD Michigan Consumer Sentiment data