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New Leader on the horizon

New Leader on the horizon

The Euro was unable to make headway ahead of Monday’s New York open with the currency again undermined by a wider lack of confidence in the Euro-Zone outlook amid fears over gas supplies. There were also further doubts whether the ECB would be able to push ahead with significant rate hikes given pressure on growth.

The Euro dipped to lows just above 1.0050 after the New York open as the dollar maintained strong, there were some reservations over selling the Euro more aggressively, especially with some speculation that the ECB could express reservations over a weak currency. The Euro was, however, unable to gain sustained relief and by the end of the day was dipping to lows of 1.0035 later in the day.

Dollar was gaining support by expectations of aggressive Federal Reserve hikes. There was also speculation over a strong US consumer prices reading this week which would reinforce pressure for aggressive Fed rate hikes and tend to undermine risk appetite.

Sterling was unable to make any headway on Monday as a more fragile tone surrounding risk appetite sapped support and domestic economic reservations persisted.

The Conservative Party leadership candidates continued to campaign on the basis of tax cuts which could give the Bank of England greater scope for raise interest rates, but the overall impact of potential fiscal policy changes was seen as limited. The 1922 committee confirmed that the first round of voting will take place on Wednesday after nominations close on Tuesday with the aim to declare a new Prime Minister on September 5th.

Sterling retreated to fresh 2-year lows just below 1.1870 before a slight recovery into the European close while the Euro again edged higher.

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