The ceasefire between the US and Iran, signed less than a month ago, has effectively broken down. President Trump declared it “over” last week following a fresh exchange of military strikes, and Brent crude surged nearly 10% on the news before easing back slightly over the weekend. Markets are nervous this morning, and with a packed week of data ahead, it could be a bumpy few days for exchange rates.
The Labour leadership contest concludes on Friday 17 July, with Andy Burnham widely expected to be confirmed as the new Prime Minister on Monday 20 July. That transition is now firmly in the price for markets, though his choice of Chancellor remains closely watched. Ed Miliband has emerged as the most likely candidate, and any formal announcement this week could move the pound.
Latest market insights:
Pound to euro:
Sterling is holding near a one-year high against the euro
- Despite the Middle East turmoil, the pound has remained surprisingly resilient against the euro over the past week, ending last week up around 1.1% and sitting close to its strongest level in over a year. Rising oil prices have increased expectations that the Bank of England will need to raise interest rates later this year to keep inflation in check, and higher UK interest rates tend to support the pound. Markets are now fully pricing in at least one Bank of England rate rise by the end of 2026.
- For property buyers, a 1% move against you on a 400,000 euro purchase equals 4,000 euros straight off your budget. With the pound near a one-year high, now could be a good moment to think about protecting that rate before it moves in the wrong direction. A forward contract lets you lock in today’s rate for a future transfer, while a rate order lets you set an upper or lower limit and we will automatically buy your currency when it is reached, even if you are not watching. Call your Lumon currency specialist on +44 (0)204 506 5672 to find out which option suits you best.
US dollar to euro:
The dollar is firm as safe-haven demand returns
- The dollar picked up safe-haven demand last week as the Middle East situation deteriorated, with the euro falling back against it. When uncertainty rises, investors tend to move money into the dollar as a perceived place of safety, which pushes its value up against other currencies. However, Tuesday’s US inflation figures for June are expected to show a meaningful slowdown in price rises, partly because oil prices had fallen sharply in the weeks before the latest ceasefire collapse. A softer inflation reading could reduce pressure on the Federal Reserve to raise interest rates, which would likely weaken the dollar and offer the euro some support.
Pound to US dollar:
Sterling has recovered strongly against the dollar in recent weeks
- The pound has climbed around 2% against the dollar since hitting a low in late June, supported by improving UK economic data and rising expectations of a Bank of England rate rise. That recovery has proved resilient even through last week’s Middle East flare-up, which is an encouraging sign for sterling.
What to watch this week:
Tuesday 14 July:
- US inflation figures for June are the week’s most important release. A lower-than-expected reading could soften the dollar and give the euro room to recover. A higher reading could strengthen the dollar and put renewed pressure on both GBP to USD and USD to EUR.
- Fed Chair Kevin Warsh delivers his first ever testimony to Congress. Markets will be listening closely for any signals on the future direction of US interest rates. Any hawkish tone could move the dollar significantly.
Thursday 16 July:
- UK GDP figures for May are published. A strong reading would support the case for a Bank of England rate rise and could push GBP to EUR higher. A weak reading would do the opposite.
Friday 17 July:
- The Labour leadership contest concludes, with Andy Burnham expected to be confirmed. Any surprise or associated announcement on his Chancellor could move sterling quickly.
Middle East:
- Diplomatic efforts continue behind the scenes. Any sign of a return to talks would likely ease oil prices and reduce pressure on central banks, which could weaken the dollar and support the euro. A further escalation would do the opposite.
If you have an international transfer coming up in the next few weeks or months, for a property purchase, a pension payment, supporting family abroad, or any other reason, the events of this week are a useful reminder that exchange rates can move quickly, and not always in the direction you’d hope.
The good news is that you don’t have to simply wait and see what happens. Speaking with a currency specialist costs nothing and carries no obligation. They can talk you through your options, including spot contracts for transfers you need to make now, and forward contracts for transfers you’re planning further ahead, and help you understand how today’s rate movements might affect your specific situation.
Contact Lumon on +44 (0)204 506 5672 for a free, no-obligation conversation and discover what options you have available to help.
