Trump withdraws from Iran nuclear deal, oil prices shift
What’s been happening?
Pound Sterling – UK Markets
Mixed data coming out from the UK today. Sterling faces near four months low against the dollar before Bank of England’s hike decision, while on the other hand pound to euro rate recovers. The dollar is rallying against the pound today, with traders selling sterling off ahead of the BoE meeting on Thursday, as interest rates are anticipated to be kept the same. Traders will be focusing on any indication that may slip and give away whether a rate hike is still probable this year. However, analysts remain sceptical about BoE’s approach, since they had cut its expectation of a May hike from 90% to around 10% within a month.
The pound to euro exchange rate is looking much healthier today, mostly thanks to an increased sell off in the euro. It would seem like the global markets are taking note from the euro to US dollar exchange rate, which is currently notably breaking down, reaching new 2018 lows. This breakdown is puling other euro pairs into its whirlpool, including EUR/GBP. This recovery is not expected to last too long however, as Eurozone prepares for BoE’s rate hike meeting tomorrow.
US Dollar – US Markets
Most global markets and media channels had their eyes set on the US yesterday, as President Donald Trump announced his decision to abandon the Iran nuclear deal. Trump described the deal as “a horrible one-sided deal that should have never, ever been made”. The deal, signed in 2015, worked out by the US, five other world powers and Iran, lifted sanctions on Iran in exchange for Tehran committing to limitations to their nuclear program. The agreement, which essentially was designed to prevent Iran from obtaining a nuclear bomb now stands at a very vulnerable state, with the European allies trying to ‘keep it together’.
Such decision increases the risk of deepening conflicts in the Middle East, isolates the US further from other global powers, as well as casts uncertainty over global oil supplies. Oil prices rose more than 2 percent today and further shift is expected as the European deal participants begin talks with Iran.
Euro – European Markets
With Germany, France and Britain being allies to the Iran nuclear deal, US President Trump’s announcement about United States exit from the pact shook up the Eurozone. The European shares strengthened today by the support of oil stocks, which were boosted by crude prices. However, shares in companies with exposure to Iran fell, plane maker Airbus, car maker Renault and PSA traded down between 0.4% and 1.7%. But even with the European oil majors strengthening their shares, possibility of a sudden unsettlement in the Middle East is causing concern. France’s foreign minister said earlier today “The deal is not dead. There’s an American withdrawal from the deal but the deal is still there”. French President Emanuel Macron will begin talks with his Iranian counterpart Hassan Rouhani today in an effort to keep the deal.
A major deal was announced between the world’s second largest mobile operator Vodafone and Liberty today. Vodafone will pay $21.8 billion for Liberty assets in Germany, the Czech Republic, Hungary and Romania to strengthen their European presence and take on competitors with a broader offer of superfast cable TV, broadband and mobile. The company will get access to 54 million homes on its cable and fibre network, allowing them to cross sell a range of services to those clients.
What’s coming up?
UK: There is very little fresh data coming out of the UK today. Markets will focus on Thursday’s Bank of England rate meeting and inflation report.
US: Again, little data coming out of the US today, markets will focus on the dollar rally. On Thursday we will see the consumer price index figures coming out, which will likely affect the USD rate.
EU: No major data is expected to come out of Eurozone today. France, Germany and Britain will be approaching Iran with attempts to sustain the Iran nuclear deal without the United States involvement. Next week all pact allies will be holding a meeting to discuss the matter.