Higher oil prices weigh on markets

The euro and sterling have failed to build on yesterday morning’s gains against the dollar, trading back down at around $1.1575 and $1.3525 respectively this morning from highs yesterday of about $1.1615 and $1.3570. EURGBP remains fairly tightly range-bound as it continues to hover in and around the £0.8550 level. A continuing rise in oil prices – Brent crude is up at around $91 per barrel amid ongoing concerns about the situation in the Middle East – is maintaining upward pressure on bond yields and weighing on equity markets.

Government bond yields edged higher with curve steepening again very much the order of the day. US 2-year yields were broadly flat but 10- and 30-year increased by 3bps and 5bps respectively, while German and UK long-dated yields rose by 2-3bps. It is more of the same this morning with yields moving higher again. Equity markets started the week on the back foot, the S&P 500 shedding around 0.5% and the Stoxx Europe 600 off around 0.3%.

UK labour market data released a short while ago were broadly in line with expectations. The unemployment rate came in at 4.9% in Q2, unchanged from the three months to May but down slightly from 5% in the first quarter of the year and a recent peak of 5.2% in the final quarter of 2025. Private sector wage growth eased further in the quarter with the y-o-y increase in average weekly earnings dipping to 2.8% from 3.1% in Q1 (and 3.4% in Q4 2025).

For the day ahead, economic data due include the ZEW investor survey for the Euro area/Germany and industrial production, housing starts and import prices (all for July) in the US. On the central bank front, ECB Chief Economist Philip Lane is scheduled to speak at a conference in Dublin.