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Markets gear up for a vote of no-confidence

Markets gear up for a vote of no-confidence

Economic Calendar

  • 06/06/2022: United Kingdom – Vote of confidence in Prime Minister Boris Johnson
  • 08/06/2022: EUR Area – GBP Growth rate MOM and YOY.
  • 09/06/2022: EUR Area – ECB Interest Rate Decision and Press Conference
  • 10/06/2022: United States – Inflation Rate YOY
  • 10/06/2022: United States – Michigan Consumer Sentiment June

 

Last Week Recap

After hitting monthly highs of 1.2660 on the first trading day of last week, Cable (GBP/USD) failed to maintain recovery momentum and entered a period of consolidation towards the end of the week. In part due to holiday-thinned trading, as the UK markets were closed Thursday and Friday for the Platinum Jubilee Bank holiday celebrations.

Early in the week Germany and the Eurozone reported record high inflation levels which triggered risk-off trading flows. These risk-averse market conditions, along with downbeat remarks from the Bank of England Deputy Governor, Jon Cunliffe, knocked the cable to eight-day lows of 1.2459 as we saw a flight to the safe haven currency later in the week.

Finally, US employment data – Non Farm Payrolls – showed a positive increase with 395k new jobs created.

 

The Week Ahead 

With a relatively sparse economic calendar this week, the markets will continue to concentrate on macro political events. In the UK specifically, Tory rebels gear up for a vote of no-confidence in UK PM Johnson later this Monday. To counter this, the British government announced a stimulus package to mitigate the cost-of-living crisis. It is possible we see more government stimulus, therefore higher inflation and faster interest rate rises.

In the rest of the world, focus will be on the US Consumer Price Index (CPI) on Friday. Traders will gear up for this critical event as the FedReserve remains quiet before the next FOMC meeting.

Ahead of the US inflation release, the European Central Bank (ECB) will announce its monetary policy decision on Thursday, mostly confirming a July increase. Any hints from the ECB on the pace of tightening will be closely followed, and this could have a significant impact on the EUR/GBP cross and, in turn, on sterling.

On the final trading day of the week, the US Preliminary Michigan Consumer Sentiment data will also be published after the CPI data, wrapping up a relatively light week.

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