News

May 12, 2026

Sterling slides as Starmer fights for survival

Sterling has come under pressure this morning amid growing political uncertainty around Keir Starmer's future as Prime Minister. Last week’s heavy Labour losses in the local elections have triggered a wave of public dissent within the party, with more than 75 MPs now calling for his resignation. At a cabinet meeting this morning, Starmer acknowledged the scale of the defeat and accepted personal responsibility but made clear he intends to "get on with governing" despite what he described as a "destabilising" 48 hours. No formal leadership challenge has been triggered so far, but markets are watching developments closely. Investors are concerned that if Starmer is forced out that he would be ⁠replaced by a more left-leaning Labour leader who might push for more spending (by raising public borrowing and taxes further) at a time when Britain's finances are already stretched. UK borrowing costs are already the highest in the G7 and have risen the most since the Iran war, so a further increase will add even more pressure onto our public finances. These fears are being played out this morning in the markets with long-dated gilt yields surging to their highest levels in nearly 30 years, UK banking stocks down (over fears of potential banking surcharge rises) and Sterling losses. As a result, GBP/USD has fallen around 1% from yesterday's high and currently trades around a 12-day low. GBP/EUR has dropped close to a cent from yesterday's peak and sits around a 2.5-week low. The direction from here will hinge on how quickly the political situation resolves and/or whether things will escalate. Any signs of stabilisation could see the Pound recover some of its losses, but a prolonged period of uncertainty and/or a potential leadership change, could see further losses.

May 1, 2026

Oil spikes, central banks hold, and Sterling climbs

After a tense start to the week, Sterling is ending it in a stronger position. Reports of potential new US military operations in Iran led to oil spiking to the highest levels since the start of the conflict earlier this week (Brent crude hit above $125/barrel). It’s since receded but remains at elevated levels as the Strait of Hormuz continues to be blocked and with no resolution in sight. Attention then turned to a busy week of central bank interest rate decisions. As expected, the Federal Reserve, ECB, and Bank of England all voted to keep rates on hold and the tone across all three reflected a shared concern about the inflationary implications of prolonged high energy prices. The Fed vote was the most divided it has been since 1992 (8-4 vote split) and with incoming Chair Kevin Warsh expected to push towards lower interest rates, many analysts believe the next move in US rates is down rather than up. Conversely, yesterday’s BoE and ECB meetings indicated they looked more inclined to raise rates than cut them. The ECB held unanimously, but President Lagarde's press conference disappointed those expecting a firmer signal on future rate hikes. Although she acknowledged that a rate rise had been discussed, her overall tone was more cautious than markets had anticipated. They noted that the Euro area came into this period with inflation near target and a relatively resilient economy which they believe gives them a buffer to absorb some of the heavier shocks of this energy crisis and the power to not make any rash policy decisions. A June hike remains close to fully priced in, though expectations for the total number of hikes this year have begun to ease, which led to some weakening in the Euro (particularly against GBP). The Bank of England voted 8-1 to hold, with chief economist Huw Pill the only one calling for an immediate hike. Policymakers seem alert to the risk of inflation running hot but also aware that the oil shock is likely temporary and that a softer labour market should keep a lid on wages. However, the Governor also made it explicitly clear that they were prepared to act pre-emptively if energy-driven price pressures did begin to feed into wages (to avoid a wage-price spiral). This was taken by markets as being more hawkish than the other central banks' tones and therefore made Sterling more attractive to investors seeking higher yields. As a result, the GBP/USD rate has rallied by around 1.2% from yesterday morning and now trades at a 10-week high. The GBP/EUR pushed up by over half a cent yesterday and trades towards the higher end of where it's traded since the end of August. With central banks in wait-and-see mode and war risk continuing in the background, the direction of travel for rates will continue to be shaped by incoming data and any meaningful developments in the Iran peace process.

Apr 8, 2026

Markets surge and USD weakens as US and Iran agree two-week ceasefire

Markets have rallied sharply following the announcement of a two-week ceasefire between the US and Iran whilst they negotiate a lasting peace deal. Given the de-escalation, the relief across global markets has been immediate and dramatic. Oil prices have tumbled and equity markets have surged on expectations of a resumption of oil and gas flows through the Strait of Hormuz. The drop in oil prices is being described as the biggest one-day fall since the 1991 Gulf War with Brent Crude falling by around 16%. The USD has also been heavily sold as the safe-haven demand that has underpinned it throughout the conflict quickly evaporated and as traders recommenced pricing in Federal Reserve interest rate cuts for later this year. Peace talks are due to begin on Friday in Pakistan and may be extended if both parties agree, which gives some hope that this is more than just another pause. That said, it’s important to not get too getting carried away as there's still a risk that the war could restart any time, as they’ve not officially ended the hostilities. Furthermore, some of the proposed demands from both sides could prove too difficult to overcome in the talks. As a result, the GBP/USD has moved 2-cents higher from yesterday evening and trades closer to the higher end of where it’s traded since the onset of the war. The EUR/USD rallied over 1.5% and trades around a 5-week high. The GBP/EUR has moved to an 8-day high after gaining half a cent from yesterday's low. Markets will be closely watching how the peace talks develop over the next two weeks. If genuine progress is being made and the Strait fully reopens, then there’s a chance we might see further USD weakness and a continued recovery in risk currencies. However, if talks stall or fighting resumes, the moves seen over the past six weeks could quickly return.

Apr 7, 2026

Markets on edge as Trump issues most severe threats yet ahead of tonight's deadline

Markets remain in a cautious mood as the Iran conflict enters another week with no clear resolution in sight and as rhetoric from President Trump ramps up. Over the weekend, Trump threatened to take Iran “back to the stone ages” with attacks on key civilian infrastructure (such as bridges and power stations) if a deal to reopen the Strait of Hormuz isn't reached before tonight's 1am deadline. This morning, he doubled down on these threats stating that “a whole civilisation will die tonight, never to be brought back again” if a deal isn't made. There is still hope that things will de-escalate but the next 24hrs look to be pivotal. So far, financial markets have taken the latest threats largely in their stride having become rather numb to Trump’s pattern of alternating between threats and deadline extensions. Oil prices remain elevated and equity markets are generally down today, but both remain poised to react depending on events on the ground. In other news, Friday’s US non-farm payroll and unemployment data came in better than expectations. So far, there are few signs that the Iran war and the spike in oil prices are having a meaningful impact on the US economy. However, this Friday's US inflation report (CPI) will be the first to fully capture the war's impact on energy prices and should provide a much clearer picture. Either way, a divergence between the US and Europe is becoming more apparent. Early Eurozone inflation and sentiment data points to a significant stagflationary impact from the war (i.e. high inflation and slow growth). Headline inflation spiked to 2.5% in March from 1.9% the month before and the markets are pricing in nearly three hikes from the ECB this year. In the UK, markets are currently pricing in two BoE rate hikes before the end of 2026 and, with the UK economy and labour market already in a fragile state, the BoE will be wary of hiking interest rates too aggressively to avoid tipping the economy into a recession. As a result, the GBP/USD remains subdued but around 1cent above last week’s low. The GBP/EUR trades in a relatively tight range but towards the lower end of where it’s been over the past 5-weeks. As before, Iran war developments will remain the dominant market driver and any credible signs of de-escalation could trigger a sharp drop in oil prices, a move away from safe haven currencies (e.g. USD) and vice-versa if things escalate instead.

Mar 19, 2026

Oil rises after Trump threatens to obliterate Iran's gas fields

Markets are on edge this morning after a dramatic escalation in the Middle East conflict overnight with Gulf energy infrastructure being targeted and rhetoric ramping up from President Trump. Yesterday, Israel launched strikes on Iran’s South Pars which is part of the world's largest natural gas field. Iran then retaliated overnight attacking Qatar's Ras Laffan natural gas processing complex twice within 12 hours causing extensive damage. Other missile and drone strikes have also been seen/intercepted in other Gulf State energy plants such as Kuwait, UAE, and Saudi Arabia. Trump responded to say that there would be "no more" Israeli attacks on South Pars, but warned that if Iran "unwisely decides to attack” Qatar again, the US would "massively blow up the entirety of the South Pars Gas Field at an amount of strength and power that Iran has never seen or witnessed before." The threat has sent shockwaves through markets with crude oil prices surging up to $118 per barrel and some big falls in major stock markets. Analysts have warned that damage to key gas processing facilities of this kind could take months or years to repair, potentially triggering a long-lasting global gas shortage. Europe remains particularly exposed given its reliance on LNG imports and, consequently, European stock markets have seen some of the more significant falls this morning. The situation is fluid and markets are currently pricing in a prolonged disruption to Gulf energy flows. Any sign of de-escalation could trigger a sharp reversal in oil prices and a shift in currency rates (away from perceived safe havens, such as the USD). Until then, volatility is likely to remain elevated and risk appetite fragile. In other news, as widely expected, the Federal Reserve kept interest rates on hold last night and they highlighted that uncertainty over the economy remains high and that the full impact of the war is still unclear. Later today, both the BoE and ECB are widely expected to keep interest rates on hold. However, the tone of the accompanying statements will be closely watched given that oil-driven inflation is complicating the path back to their target inflation levels. As a result, the GBP/USD fell a cent overnight and currently trades around 0.5cent from the lows seen last week (i.e. the 3-mth low). The EUR/USD is down a cent from yesterday’s high and close to the lowest levels since the start of August last year. The GBP/EUR remains buoyant but caught within the familiar range we’ve seen this past week.

Mar 10, 2026

Oil swings drive FX moves as traders eye potential de-escalation

Markets remain turbulent after we saw the most volatile day in oil trading history yesterday. Brent crude prices spiked to nearly $120/barrel yesterday morning (see chart below) - its highest levels since June 2022 - as the Iran war escalated over the weekend. Markets grew increasingly concerned about the possibility of a prolonged disruption to oil shipments through the Strait of Hormuz. However, market sentiment improved later in the day after reports that G7 nations are considering a coordinated release of emergency oil reserves in an effort to stabilise prices. The speculation alone was enough to cool the rally in crude oil prices. Then last night we had comments from Trump hinting that the operations against Iran could end soon, stating that "the war could be over soon”. This triggered a further relief rally, as traders began to look ahead to a possible de-escalation, which led to oil prices dipping back down to around $90, a surge in equity markets, and a weaker USD. As a result, the improved market risk appetite has pushed the GBP/USD up nearly 2-cents from yesterday's low and it currently trades around a 10-day high. The GBP/EUR remains buoyant and continues to trade around a 1-mth high. The EUR/USD has rallied around 1.3% from yesterday’s low and hit a 1-week high this morning. Looking ahead, there are some key data releases to come out this week, such as US inflation (tomorrow) and UK/USD GDP (Friday). However, these releases may attract less attention than usual as the data is pre-war and therefore old news. Instead, markets will likely remain focussed on developments in the war this week with a bit of an eye on next week’s central bank meeting bonanza (Fed, BoE and ECB) to hear their initial thoughts on the US-Iran conflict and how it may influence the outlook for monetary policy decisions.

Mar 6, 2026

FX markets relatively calm despite escalating Middle East conflict

Following the initial moves on Monday, FX markets have been relatively subdued so far this week. This likely reflects that a large degree of the risk was already priced in and the notion that geopolitical shocks tend to cause only temporary market disruptions. The fact that the attacks occurred at the weekend while markets were closed has also likely helped contain things and limited any immediate knee-jerk reactions. That said, the conflict has been broadening this week and we’ve not seen much in the last few days to suggest that a short, sharp conflict is in store. The US and Israel have been carrying out sustained air campaigns, while Iran has been responding with missile and drone attacks targeting Israeli and US assets across the Middle East, including in the UAE, Kuwait and Saudi Arabia. President Trump has suggested that military operations could last four to five weeks, while Iran’s foreign minister has indicated there is “no limit” to the country’s right to self-defence. Polymarket is now assigning only around a 30% chance of an end to US military operations by the end of March, which is down from more than 80% in the immediate aftermath of Saturday ’s attack. Clearly among the main implications of the war is the fallout in oil. Brent crude oil prices have continued to rise this week and are up by over 5% today to $88 a barrel level from the $70 mark. Iran’s effective blockade of the Strait of Hormuz has reduced vessel traffic by around 90%. If the disruption persists, a move toward $100 per barrel cannot be ruled out. Where we go from here will be highly dependent on the length of the conflict. There are many factors that could affect this but the extent of the depletion in Iranian missiles/drones might decide the speed of de-escalation from the Iranian side. From the US side, the level of political and market pressure Trump receives from home (given the upcoming midterm elections) could be key for deciding how long he wishes to continue fighting. For now, markets appear to be pricing a conflict lasting several weeks. As long as that assumption holds, and barring any more bad news, further USD gains may be relatively limited. However, a broader regional escalation and a prolonged closure of the Strait of Hormuz would no doubt create further risk aversion and therefore exacerbate the market reactions we’ve seen this week (i.e. higher oil prices, a stronger USD, and a sell-off in perceived ‘riskier' currencies (e.g. EUR and GBP)). As a result, the GBP/USD trades around 1.8% lower than last week’s high and around half a cent off Tuesday’s low (which was a 10-week low). The Euro has weakened a lot this week (mainly due to their heavy reliance on LNG) with the GBP/EUR trading around 1.2% higher this week (a 1-mth high) and the EUR/USD down over 2% this week (trading around a 3-mth low).

Mar 2, 2026

Safe havens rally as US–Iran conflict drives risk aversion

The sharp military escalation over the weekend between the US/Israel and Iran, alongside the widening of the conflict across the Gulf region, has triggered a classic risk-off environment in financial markets. Stock markets and risk currencies (e.g. GBP) have come under pressure, while traditional safe-haven assets (e.g. USD and Gold) have strengthened as investors seek safety. Furthermore, oil prices have surged (circa 8% as I write) as investors become concerned that supply routes will be disrupted (roughly one-fifth of global oil and LNG travels through the Strait of Hormuz). This spike in oil might have been higher had global inventories not risen so much over the past year following a year of oversupply and therefore the immediate impact hasn’t been so dramatic. However, if the conflict drags on, and supplies continue to be disrupted, then analysts believe there’s scope for energy prices to rise further which could reignite global inflation and send the global economy into a tailspin once again. As a result, the GBP/USD has continued its fall from the back end of last week (where FX markets had started to price this war in) and dipped around 1% earlier to a 10-week low. The GBP/EUR is steady this morning but still trading close to the lower end of where it’s been in the past 10-weeks. The EUR/USD has fallen around 1-cent this morning and currently trades around a 5-week low. Looking ahead, there are some important data releases this week including EU inflation (Tues) and EU GDP, US retail sales, and US non-farm payroll data (all out on Fri). However, all eyes will remain focused on the situation in the Middle East and these geopolitical developments likely continue to dominate the sentiment in the near term.

Feb 5, 2026

Sterling falls on BoE and Starmer pressure

Sterling has weakened today following the latest Bank of England rate decision and rising UK political uncertainty. As expected, the BoE voted to keep interest rates on hold at 3.75%. However, the vote split was more dovish than expected, with four of the nine policymakers opting for a rate cut versus expectations of two. They also downgraded the growth forecasts for the next two years and warned the economy was now in danger of a sharp jump in unemployment. Together, this has increased the odds of a less gradual downward path of cuts form the BoE which has led to some Sterling weakness. Earlier today, the Pound had already fallen sharply amid growing pressure on Prime Minister Keir Starmer. He is facing mounting criticism within his own party over his decision to appoint Peter Mandelson as US ambassador, despite his links to Jeffrey Epstein. Markets seem to be bracing for the possibility of a leadership challenge - with some research companies suggesting a roughly two-thirds chance he could step down in 2026 (up from around 51%). Angela Rayner is currently the bookies favourite to win any leadership contest which is seen as a potential risk to Sterling given the likelihood of a shift further to the political left. In other news, the USD has continued to recover from recent losses. This follows the announcement of Trump's pick for the new Federal Reserve Chair role - Kevin Warsh - who is generally perceived as a more hawkish than the other main contenders. Additionally, the latest Fed meeting was generally more upbeat tone which has reduced expectations for aggressive US rate cuts. Finally, comments from US Treasury Secretary Scott Bessent have helped calm concerns that Trump’s earlier remarks signalled a deliberate policy push towards a weaker USD. As a result, GBP/USD has fallen by nearly one cent today and is now around three cents lower than last week’s high, trading at a 13-day low. GBP/EUR is down approximately 0.75 cents on the day and around 1% lower from yesterday’s high, trading at an 8-day low.