Jittery markets await Fed as Mideast conflict rages on

Daily Currency Update

The Euro traded in a quiet range yesterday as markets nervously watched developments unfold in the Middle East. Euro area investor sentiment figures were released yesterday and showed a positive surprise surging by 23.7 points to a high of 35.3 which was well higher than expectations of 23.5. This figure suggests growing optimism in Europe despite geopolitical headwinds and tariff threats out of the US. European bond yields edged higher also while investors look for safe haven assets moreover than return.

UK Chancellor, Rachel Reeves, said foreign investors should view the UK as an “oasis of stability” at a time of global and political turmoil. Ms. Reeves added, “in the age of insecurity we live in today, I hope that people are increasingly looking at Britain and see sustainable politics, a stable economy and tough, robust fiscal rules.” Reeves is aiming to balance day-to-day spending by 2029/2030 but only has £10 billion pounds of lee-way to meet that goal, headroom that could easily be eroded by higher borrowing costs, slower growth or unexpected spending needs.

The US Dollar traded slightly firmer through yesterdays session after economic data showed American consumers are more cautious as trade and inflation uncertainty linger ahead of the Federal Reserve’s policy meeting later this week. The conundrum - retail sales are softer than expected and wage growth remains elevated creating a headache for the Fed. The Dollar initially weakened after the print but then steadied throughout the North American session.