During the week, Theresa May’s government came under fire from all sides for the Windrush scandal, the US President Trump faced allegations from James Comey, the ousted director of the FBI, and Trump’s attorney was in court after files were seized in an FBI raid on his office. All of this played out against a backdrop of tense relations with Russia.
The dollar rose to its highest level since January, driven by expectations of a more aggressive Federal Reserve. A drop in the euro also helped boost the U.S. currency, after European Central Bank President Mario Draghi warned that rising protectionism posed a risk to the $10 trillion eurozone economy and stressed that the ECB would be cautious about removing its large monetary stimulus.
Dovish comments by Bank of England governor Mark Carney threw some doubts on the prospect of a May interest-rate hike. The governor drew attention to the mixed data from the UK economy and highlighted that he did not want to be too focused on the precise timing of when rates might next rise. The comments followed data that showed that UK wages rose faster than inflation for the first time in a year in the three months to February.
However, annual consumer price inflation fell to 2.5 per cent from 2.7 per cent in February, falling more than expected, although services inflation, often used as an indicator of domestic inflation pressures, rose to 2.5 per cent from 2.4 per cent. Economists expect real wage growth to strengthen further over the next few months, with inflation edging down further as the effects of sterling’s post-EU referendum depreciation start to dissipate.
The oil price reached its highest level since November 2014. Again, geopolitics lay behind the move, as the strikes on Syria prompted fears of constrained supply from the Middle East. Reports suggested that Saudi Arabia was now targeting an oil price in the range of $80 to $100 a barrel helped boost the oil price. This was taken as a sign that Riyadh will seek no changes to a supply-cutting deal even though the agreement’s original target is now within sight.
China stated its economy grew 6.8 per cent in the first quarter of 2018, ahead of a consensus estimate of 6.7 per cent. This is ahead of government targets and marks the third-straight quarter of 6.8 per cent growth in the world’s second-largest economy.
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