By Paul Newfield
This Weeks Data
Despite a relatively low level of data releases this week so far, further key publishing is expected following Tuesday’s German and UK manufacturing numbers – with an expected decline in the UK’s industry, as well as services, but a surprise increase in Germany’s – the strongest since June 2022. This was tempered, however, by a fall in business sentiment in Europe’s largest economy, in part driven by the current Middle East conflict – the Pound has clawed back about half a cent against the Euro since the lows of Friday evening.
Wednesday pre-trading sees the expected continuation of a steady UK inflation rate of 3.0%, despite an increase in fuel and food costs. The month on month and PPI and RPI figures were all expected to come in higher than the previous, which may have had a positive impact on Sterling. The only other UK data is retail sales on Friday, again pre-trading, which are scheduled to come in significantly down, balancing out any possible gains made earlier on in the week. With little else, in terms of economic data for the rest of this week, the focus centres on events elsewhere…
The Middle East Conflict, the US and Geopolitics
Weaker-than-expected PMI data and escalating Middle East tensions caused the Pound to fall against the Dollar after a two-cent improvement on Monday, raising fears of an energy price surge. UK business activity growth slowed to its lowest level since September 2025, with the conflict expected to halt growth and take inflation significantly higher. Manufacturing cost growth accelerated at the fastest pace since Black Wednesday in 1992.
On Monday, US President Donald Trump announced a five-day postponement in planned strikes on Iran’s energy infrastructure, claiming that “positive talks” were underway, a claim Iran have dismissed. The recent surge in energy prices has led investors to increase bets on policy tightening this year, with markets now anticipating multiple Bank of England rate hikes, marking a complete reversal from pre-conflict expectations of cuts.
Hopes for an end to the prolonged Middle East conflict grew on reports that the US was pursuing talks with Iran. Israeli media indicated that Washington was seeking a one-month ceasefire to enable negotiations, while the New York Times reported that the US had sent Iran a 15-point proposal to resolve the conflict. This raised optimism even after President Trump ordered the deployment of about 2,000 troops to the region, as the administration weighed options to ease Iran’s control over the Strait of Hormuz.
Impact on other markets
With Gold down over 20% since the highs of January and the FTSE 100 down 10%, it has come as some relief that Brent Crude has now also dropped up to 4% on news that Washington was attempting diplomatic efforts to end the war. With month-highs against the Canadian and Australian Dollar and middling levels against the Emirati Dirham and the New Zealand Dollar, should you need to buy these other currencies from Sterling, now may be the time to consider securing. As ever, for assistance in making the right decision regarding timings, do stay in touch with us and make your money go further.