Middle East conflict in focus

Currency recap

Markets finished the week on edge following Israel’s strikes on Iran Friday morning. Donald Trump took to socials in an attempt to urge Iran to accept a nuclear deal to avoid further attacks. USD, CHF, and JPY were the biggest beneficiaries of currency flows to finish the week.

Today's GBP rates

What we think

The conflict between Israel and Iran continued over the weekend. Worries around oil supply has sent oil prices 5% higher on the open this morning but prices have come back down since and European equities and US equity futures are all pointing to a positive start. The dollar has given up some of the gains from Friday as well with GBPUSD and EURUSD starting higher. President Trump comments over the weekend suggested the US could be involved in the conflict, but indicated he believes there is still a possibility both Israel and Iran could reach an agreement. Trump also reportedly vetoed an Israeli plan to kill Iranian Supreme Leader Ali Khamanei. Developments in the Middle East remain a key factor.

For the week ahead we have both the Fed and Bank of England rate decisions. These are both expected to hold rates and will likely state they will continue to wait for developments in tariff negotiations, as well as current geopolitical tensions to gauge the path of their future rate paths.

UK and US retail sales are due out this week, as we wait to see the impact of tariff uncertainly on consumer spending and appetite.

Following on from last week's two sets of disappointing data points from the UK, Wednesday sees the release of May’s UK CPI numbers, which are anticipated to show that CPI, core CPI and services CPI all declined. Markets have already moved the needle to September for when they expect the next BoE rate cut and another lower number could well firm up the odds of the next cut happening in August. This in turn will likely add pressure on the pound.

Read more about the Bank of England & Federal Reserve's interest rate decisions here:

• When is the next BoE interest rate decision?
• When is the next MPC meeting?
• When is the next Fed interest rate decision?
• When is the next FOMC meeting?

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