The week ahead 30 June 2025 - Oil price retreats, so does the dollar
What to watch out for in the UK economy and property market this week.
Last week’s big surprise was the tumble for oil prices following the announcement of a ceasefire between Iran and Israel. On Friday, Brent crude oil was trading at just under $67.60 a barrel, down from $73.80 a week earlier. The investment bank, Goldman Sachs, now estimates the risk of a major disruption to the oil supply from the Middle East at just 4%. The situation remains volatile and fast developing, but it is encouraging that June did not see oil come close to its 12-month high of $87.53 (set in July 2024), let alone the $129.20 seen in the early weeks of the Russian invasion of Ukraine 2022.
All this is good news on the outlook for UK inflation, particularly given the new Ofgem price cap will come into effect tomorrow, which will cut the average energy bill by 7%. Another factor to consider is the gradual strengthening of the pound sterling against the US dollar. Presently, £1 buys $1.37, up from $1.26 a year ago. A lot of commodities are priced in US dollars, so this strengthening of the pound will help ease inflationary pressures. This should improve the chances of a Base Rate cut at the next Bank of England policy meeting.
Overshadowed by the news from the Middle East last week was the latest UK PMI figures which were moderately encouraging. The convention of the PMI index is a reading over 50.0 suggests the commercial side of the economy is growing. The UK composite index figure for June was 50.7, up from 50.3 in May. As with previous months, there was a disparity between the performance of the services sector on 51.3, and manufacturing on 47.7. The PMI data points to an economy that is seeing low growth. However, a combination of upcoming government infrastructure spending and Bank of England rate cuts should energise growth over the medium- to long-term.
This week sees a lot of data published on the US labour market, which will give us a better idea whether the instability caused by the new tariffs regime is hitting the American domestic economy. So far, moratoriums on many of the tariffs mean that the full price impact has not yet occurred, but the hit to business sentiment and sense of uncertainty may have encouraged employers to delay recruiting new staff.
We believe that the latest US labour market figures will show a loss of momentum. However, because negotiations on many of the tariffs are still ongoing, with a compromise outcome still possible, firms are unlikely to make major changes to headcount at this stage.
Investment Focus – Offices
Whilst the motto ‘Thrive in 2025’ is yet to materialise, the underlying fundamentals of the UK office sector cement the case for increased investor confidence in the second half of the year. Office occupancy continues to recover, with Remit Consulting reporting UK occupancy levels reaching a post-pandemic high of 38% compared with the pre-pandemic average of 60%. Rental growth prospects for centrally located best-in-class space remain strong, resulting in yield stabilisation for prime assets, which remain at above long-term average levels. Despite on-going uncertainty, further interest rate cuts will encourage investment, supported by the growing recognition that the best assets with long-term income and sustainability credentials will outperform.
This week's figures
TUESDAY 1 JULY
US JOLTS Job Openings, May
7.4m previous
7.3m forecast
Following stock market volatility and uncertainty on the trade situation, we believe many US firms, particularly exporters, will have slowed recruitment in May.
TUESDAY 1 JULY
Euro Area Inflation, June
2.0% previous
1.9% forecast
With the economy subdued both at home and abroad, we suspect many Eurozone firms will have been reluctant to push up prices aggressively in June, resulting in lower inflation.
THURSDAY 3 JULY
US Non-Farm Payrolls, June
139k previous
115k forecast
These payroll figures will be for June, so are more recent than the US job openings data mentioned above (which relate to May), so we believe these could show a more apparent slowdown in recruiting.
