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The US dollar and other safe havens were a magnet for investors last week.
Sterling ended last week underneath a wave of negative sentiment as markets reacted with unease to events in the Middle East.
As typically happens at times of global stress, investors flocked to the US dollar, which ended Friday 0.4% up against the pound and around a quarter of a per cent up against the euro over the week. GBP/EUR meanwhile fell by 0.5% as UK data arrived.
The data in question was UK retail sales. Sales volumes were unchanged in March, having been forecast to increased by 0.2% and following 0.1% growth in February.
Israel’s latest round of military strikes against Iran overshadowed the usual hustle and bustle of currency markets. The mood was tense and markets saw a notable shift from riskier assets like stocks and fringe currencies towards the US dollar and fixed income bonds.
Unfortunately, the mood is much the same heading into this week. The pound in particular can only sit and watch as discussions continue to be dominated by the threat of regional war in the Middle East. GBP/EUR fell further in weekend trading to open the week at its lowest level in a month.
In case you missed it, our April to June Quarterly Forecast was published last week. The report looks in detail at all the trends that might impact your budget, from interest rates and the economy to shipping costs and geopolitics. It’s well worth the read and you can access your copy for free by clicking the link here.
Here’s what to look out for this week…
European budget statistics arrive today but the week kicks off in earnest on Tuesday with HCOB manufacturing and services data from the eurozone.
Wednesday sees the German Ifo Business Climate survey and US durable goods figures, while US GDP figures on Thursday could lead to an increase in market volatility.
Friday is headlined by US personal spending and income. Despite the flow of macro data, it could well be that geopolitics is the main driver of moves this week.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 3918 7255 to get started.
GBP: Growth offset
UK retail sales flatlined in March, with increases in fuel sales offset by reductions by food businesses. In fact, if you exclude fuel UK retail sales fell by 0.3% month-on-month, well below February’s 0.3% growth outside of fuel.
GBP/USD: the past year
EUR: Debt down?
The eurozone’s government spending figures today might be the most intriguing development. Debt to GDP in 2023 is forecast to dip to 88%, having climbed to almost 91% in 2022. If that figure feels high, it’s worth remembering that it climbed to more than 97% during the pandemic years.
GBP/EUR: the past year
USD: Dollar benefits from risk
The US dollar once again proved itself the best safe haven for nervous markets. The dollar saw a massive influx of trading, a trend that could continue unless any progress is made on the shaky geopolitical situation.
EUR/USD: the past year
For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business account manager on 020 7898 0500 or your Private Client Account Manager on 020 7898 0541.
