No respite from rising oil prices

There’s no respite it seems from rising oil prices with Brent crude now north of $105 per barrel, up around $15 on the week and not far shy of where it was just before the original US-Iran ceasefire was announced on April 7th. Trump has announced a 3-week extension to the Israel-Lebanon ceasefire, but that may not provide much reassurance for markets. In FX, the dollar continues to nudge higher with EURUSD and GBPUSD trading at around $1.1680 and $1.3460 respectively this morning, leaving EURGBP at about £0.8675.

Market expectations for central bank rates have become more pessimistic again over this past week, particularly so for the ECB and Bank of England. Though both are expected to stay on hold at next week’s round of monetary policy meetings, they are now seen hiking by 65bps and 60bps in total this year respectively, an increase of circa 25bps and 35bps relative to what was priced in at the end of last week. That this has occurred as oil prices have backed up sharply again is no surprise, as rate expectations have been moving closely in line with oil prices since the war in Iran began.

The Composite PMI for the Euro area fell below the key 50 level in April (47.6) for the first time since the end of 2024, on the face of it pointing to a small decline in GDP in the zone. The equivalent measures for the UK and US ticked up this month (both coming in at 52.0), pointing to modest growth in economic activity. All three surveys reported rising input and output price pressures across manufacturing and services.

Retail sales volumes in the UK rose by 0.7% in March according to official data published a short while ago, reversing a fall of 0.6% that occurred in February. For the first quarter of the year as a whole, volumes rose by 1.6% from the final quarter of last year and were up more than 2.5% on the corresponding quarter in 2025. Separately, consumer confidence fell to a more than 2.5 year low this month according to GfK, which noted that “everyone is grappling with rapid price rises, especially at the fuel pumps, which are taking a dent out of household budgets, and people know further price hikes are coming.”

It is a quiet end to the week in terms of economic data, with Germany’s IFO business climate index for April and the University of Michigan’s final reading for US consumer confidence this month the only releases of note.