Traders are still reacting to regarding shocking economic data out of the United Kingdom. Because of the mini-budget, the British pound is under significant pressure against both the U.S. dollar and euro. On Friday, GBP/USD was 0.2% lower at $1.35 with the pound sterling down 0.1% vs euro. News that the U.K. economy unexpectedly contracted in the month of May is one reason market analysts have given for this decline.
This significant economic shrinkage has spurred fears about the long-term viability of the pound, causing investors to adopt an especially wary stance. The new numbers show that the U.K. economy is up against a very difficult fight. Inflationary pressures and possible new harms from escalating international trade policies are two of the hurdles it has to clear.
In other absurdist news, U.S. President Donald Trump is preparing to slap new tariffs on Canadian imports. Effective August 1, these tariffs will double to 35%. He has further threatened to raise these duties even more, should Canada retaliate. Furthermore, Trump is due to describe corresponding tariffs that the European Union will be subject to in an upcoming epistle. These changes have helped create an atmosphere of volatility in international markets, impact currency speculation, and upend investor confidence.
The pan-European Stoxx 600 index made it a fourth-straight gain on Thursday. Nonetheless, IG futures point to big bourses in Europe being in for a generally negative start on Friday. As of 8:10 a.m. in London, the regional index was down 0.46%. All but one of the sectors in the Stoxx 600 are opening in the negative. Oil and gas – paired with insurance – make for the glaring exceptions.
Within the oil sector, BP has already warned of a possible drop in oil and gas revenues in the coming second quarter. The company expects an after-tax impairment of up to $1.5 billion across its portfolio due to “post-tax adjusting items relating to asset impairments in the range of $0.5 to 1.5 billion, attributable across the segments.”
“The oil trading result is expected to be strong.” – BP
The news follows an announcement by the U.K. government to invest 163 million euros ($190.5 million) into satellite operator Eutelsat. This €160 million investment will help Eutelsat compete with and provide an alternative to Elon Musk’s Starlink. This investment is a smart way to strengthen the U.K.’s competitive advantage in the quickly expanding space technology industry. Yet it reflects a notable resilience, despite the economic headwinds.