Published on: 2026-05-21
The US dollar rebounded last week following Trump's declaration that the peace deal with Iran was on "life support". The Gulf nations reportedly launched retaliatory attacks, escalating regional tensions.
The world is facing a massive 6 million bpd oil supply shortage that could keep markets tight well beyond 2026 even if the war is resolved swiftly, the IEA said last week.
Global oil stockpiles are plummeting and inventories may not recover until December 2027, with physical shortages potentially looming over Europe by the end of this month.
A reopening after June could see oil prices pushed toward $150 per barrel and staying elevated for the rest of the year, according to SocGen. Europe, after weaning itself off Russia's energy, has felt the economic pains.
The ECB stood pat at its April meeting, but signalled impending rate hikes. ECB's Survey of Professional Forecasters showed real GDP of 1% is projected for 2026, down from 1.2% in the previous survey.
Inflation rate climbed to 3% in April, the highest level since September 2023. The region is forced to increase the reliance on LNG imports from the US, which also helps render manufacturing and AI development costly.
But the IGU said that substantial investment in LNG infrastructure, supply diversification and flexible trading arrangements means the surge in natural gas prices have been contained.
European Commission President Ursula von der Leyen on Wednesday welcomed a provisional agreement on legislation to remove import duties on US goods and called on co-legislators to move swiftly to finalize the process.
Earlier this month, Trump said he would give the EU until July 4 to ratify its trade agreement with Washington, threatening to raise tariffs to "much higher" levels if it failed to do so.
While the bloc's factory activity reached a near 4-year high last month, the service sector contracted for the first time in almost a year. Germany and France both posted recorded contractions in composite readings.
Meanwhile, Switzerland is less reliant on oil and gas imports than some of its neighbours, thanks to a wider use of hydroelectricity and largely publicly owned domestic energy suppliers.
The consumer prices accelerated to 0.6% in April. Although it has surpassed the SNB's 2027 average forecast of 0.5%, the rate remained far lower than that in other major developed economies.
Still the Swiss franc is facing a combination of a moderation in safe‑haven demand and rising interest rate expectations for the ECB in reaction to higher energy prices, Julius Baer noted in late April.
The bank expected the SNB to keep its policy rate at 0% throughout 2026 and 2027 and maintain EUR/CHF 12-month target of 0.92. The pair has moved high during the war, with both currencies easing against the dollar.
British PM Starmer on Monday said he still wanted to lead Labour into the next general election despite mounting pressure after the party's rout in recent local and devolved elections, Sky News reported.
He is facing an imminent threat from around 100 back-bench MPs who no longer think he is fit for the job. The ruling party attracts less than 20% of voters today, the lowest since at least 1940s, as per an Economist/YouGov' poll.
UK inflation eased to 2.8% in April, cooling from 3.3% in March, largely due to an energy price cap introduced by government. However, it is expected to accelerate again in following months.
The BOE is wary of the dampening effect that increasing interest rates could have on an already-fragile economy amid lacklustre growth and signs of weakness in the labour market.
The unemployment rate has unexpectedly gone up while the number of job vacancies has fallen to its lowest level in five years as the initial impact of the Iran war on firms starts to be felt.
BofA said the market has been increasingly adding risk premium to the pound following last week's elections. The firm maintains a bias for a weaker pound but said headline risk is likely to lead to ongoing volatility.
The euro has erased most of its gains against the pound following UK local election. Trump is running out of patience with Iran, so a major strike might be brewing which would sap the pound.
