Weekly Market Report

Brent crude fell almost 19% in May – it’s worst monthly performance since the pandemic as the US and Iran moved towards an extension of the ceasefire.

UK consumer price index inflation surprised to the downside. Inflation fell to 2.8% from 3.3%, below the 3.0% that was forecast, largely driven by Ofgem’s energy price cap reduction. Sterling fell off the back of this as interest rate hike expectations were pared back. The market now awaits the Bank of England interest rate decision on 18th June and UK May CPI figures the day before. The Labour leadership crisis remains unresolved, UK gilts are unsettled and Sterling’s political discount has not cleared.

The European Central Bank also has an interest rate decision on 11th June. It is expected that the ECB will increase interested rates at this meeting, with two hikes expected by September.

What this may mean for businesses

Oil prices are heading in the right direction, but cost relief is likely to be slow. Brent crude is still high relative to pre-conflict levels. Supply chain and freight costs will take time to follow.

17th June UK CPI and 18th June Bank of England interest rate decisions are key – lots of businesses are hedging their risk with forward contracts in the run up.

Businesses with regular EUR purchases should be aware of the 11th June ECB rate decision and factor this into their planning.

Sterling’s political risk hasn’t gone away – if the Labour party move towards more fiscally expansive leadership then the Pound may see further volatility.

The Dollar remains supported. With no Fed rate cuts expected in 2026 and a new Chairman, political stance remains unclear.