Ahead of this week’s Fed and MPC meetings, the market is not expecting any movement yet, but is now pricing in two hikes by the end of Q2 from both the central banks and the ECB.
- Oil hit $100 for the first time in two months as strikes from both Iran and the US increased, but has dropped back to $86 since strikes were suspended at the weekend and Trump suggested he is prepared to reopen peace negotiations. This brought the market expectations for rate peaks back from two and a half hikes when the price was $100, to just two currently.
- The ECB rates committee leaving rates unchanged was no surprise, and the press release maintained a neutral tone, noting that energy prices are close to the Bank’s baseline assumptions. The Bank said it is “closely monitoring the intensity and duration of the shock, as well as its indirect and second-round effects”, which have been absent so far. The Governing Council will continue to take a “data-dependent and meeting-by-meeting approach”, and “is not pre-committing to a particular rate path”.
- UK inflation fell from 2.8% in May to 2.6% in June, the lowest reading since March 2025, with the largest drop coming from diesel falling 10.7p per litre. The problem with that is the renewed conflict and rebounded oil price will mean July's measure is almost certainly going to move back up.
- UK employment data saw unemployment steady at 4.9% in June and the rate of growth of average earnings excluding bonuses stayed at 3.4% for a third consecutive month, its lowest level since October 2020. The notable split between private sector wage growth at 2.9% and public sector pay accelerating from 5.1% to 5.5% is one to be watched.
Source: Bloomberg; pricing as per 28 July 2026
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