Garton Global | Monthly Market Digest
Sterling enters July with markets shifting from conflict towards implementation, as investors assess whether the U.S–Iran ceasefire can deliver a lasting peace and restore normal shipping through the Strait of Hormuz. Globally, attention turns to the Federal Reserve, Bank of England and European Central Bank, where incoming inflation and labour market data will shape expectations for interest rates, while the UK’s political transition and fiscal direction add a fresh source of uncertainty for sterling. Looking ahead, diplomacy, central bank guidance and UK policy announcements will be the key drivers of currencies, bonds and broader market sentiment.
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LAST MONTH: June
🇺🇸 Brent crude fell as ceasefire progress eased energy supply concerns
• Brent crude fell sharply as a ceasefire agreement and the gradual reopening of the Strait of Hormuz improved confidence that global energy supplies could normalise.
• Diplomatic progress reduced inflation concerns and supported a broader improvement in risk sentiment.
• The decline in oil lifted equities, weakened safe-haven demand for the US dollar and reinforced expectations of a more stable macro backdrop.
🇬🇧 Central banks turned hawkish as inflation risks kept rate expectations elevated
• Central banks turned more hawkish as the Federal Reserve adopted a firmer stance on inflation, the European Central Bank raised interest rates, and markets increasingly priced in further Bank of England tightening.
• Expectations of higher borrowing costs supported bond yields and drove renewed moves across currency markets.
• The shift reinforced demand for currencies backed by higher interest rate expectations while keeping pressure on rate-sensitive assets.
🇬🇧 Sterling held firm as UK political upheaval reshaped leadership expectations
• Sterling held firm as Sir Keir Starmer resigned and Andy Burnham emerged as Prime Minister-in-waiting, reducing the risk of a prolonged leadership contest.
• Markets remained alert to future fiscal policy signals, but the smoother transition helped contain political risk.
• The pound proved resilient despite uncertainty, reaching its strongest levels against the euro in almost a year.
THIS MONTH: July
🇺🇸 Oil faces renewed volatility as Iran peace deal implementation begins
• Markets will focus on whether the ceasefire evolves into a lasting agreement and shipping through the Strait of Hormuz fully normalises.
• A durable peace deal could reduce energy prices, ease inflation pressures and support risk appetite across global markets.
• Any renewed tensions, disruption to shipping or breakdown in negotiations could quickly lift oil prices, increase volatility and drive demand for safe-haven assets such as the US dollar.
🇬🇧 Central banks face policy uncertainty as markets reassess rate expectations
• Central banks will remain in focus as investors assess incoming inflation and labour market data for signs that further tightening may be needed.
• The Federal Reserve and Bank of England could stay under pressure if price growth proves sticky or jobs data remains firm, while the ECB’s next move will also be closely watched.
• Any shift in rate expectations could drive renewed volatility across currencies and bond markets, particularly if central bank guidance diverges.
🇬🇧 UK politics remains in focus as markets assess the new government’s fiscal direction
• UK politics will remain in focus as investors assess Andy Burnham’s incoming government, including key Chancellor appointments and early fiscal policy signals.
• Markets will look for clarity on spending plans and the government’s commitment to fiscal discipline as political uncertainty begins to ease.
• Any shift in fiscal expectations could influence sterling and UK gilt markets as investors reassess the UK’s economic outlook.
Have a great month,
The Garton Team.