The currency markets traded in a tight range yesterday, as geopolitical headlines came in thick and fast from both the US and Iran. Overnight, Trump claimed the US was in negotiations with Iranian officials, while Iran claimed no such talks had taken place and "the US is negotiating with itself".
S&P Global PMI data (often seen as a leading indicator) from the US, UK and Europe came in weaker than forecast; and, perhaps more concerning, the inflation readings came in much higher than expected.
UK input price inflation jumped to its highest in just over three years amid a surge in manufacturing costs. S&P Global Chief economist stated “The war in the Middle East has hit the UK economy in March, stalling growth while driving inflation sharply higher.”
UK annual YoY headline inflation data, released earlier this morning, came in as expected at 3.0%.
*Daily move - against G10 rates as of 17:00 GMT, 24.03.26
** Indicative rates - interbank rates as of 17:00 GMT, 24.03.26
Yesterday's PMI data revealed the first signs of the economic damage being caused by the war in the Middle East.
Elevated inflation readings, in particular, led to Central Banks warning of higher interest rates as they struggle to balance an economic slowdown versus potential runaway inflation.
UK Bank of England Chief economist Pill stated “Upside risks to price stability are mounting due to the events in the gulf” and that the bank stands ready to act against inflationary pressures.
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