Equals Money market report Monday

Johnson to face vote of confidence today

Matthew Rush 06 June 2022

GBP: Vote of confidence against Johnson today

EUR: Possible rate hike from ECB on Thursday

USD: Quiet until Friday’s inflation figures

Sterling 

A short week for the UK as most were off celebrating the Queen's 70 years of service to the country, however, Rishi Sunak’s £15bn stimulus package helped the pound move higher early on last week. The economic calendar was light on significant data, however, the data that was released offered a dull outlook for the UK’s economy with the CBI stating it saw limited growth ahead as the cost-of-living squeeze and rising interest rates would reduce consumer spending.

The UK will be quiet on the data front with no red flag data due this week. The Chair of the 1922 committee published this morning that they had the 54 letters to strike a vote of no confidence which is due at 6pm tonight, however, Johnson is expected the win the vote, leaving him safe from another challenge for a year. Chancellor Sunak will be in front of parliament today and expected to answer questions and concerns on rising inflation within the UK and how he prepares the country to weather the storm, this is unlikely to cause any volatility for the pound.

Euro 

The euro started last week in a similar fashion to the pound and pushed higher against the buck after ECB President Lagarde stated the eurozone will avoid a recession and that interest rates will be out of negative territory by the end of September. Sanctions were once again up for debate after talks with Hungary failed at the summit as a full embargo against Russian oil is currently off the table. German inflation spiked to 8.7% in May with energy and commodity prices continuing to enhance inflationary pressures within the EU.

The European Central bank will be the key focus this week with a 25bps rate hike possibly on the cards and the beginning of the end of the central bank's QE process. However, some fear the possible market fallout from rising rates and want commitment from the ECB to launch a new bond-buying scheme to counter any unjustified spike in the borrowing costs of heavily indebted countries. There is no other red flag data due this week apart from the ECB’s statement with most expecting a pushback of the rumoured 50bps hike in July.

USD

ADP Non-Farms were being watched by most UK investors on Thursday as the bank holiday meant thin liquidity against the pound may have resulted in an exaggerated move, however, the figure largely missed its target, finalising at 128k. Nevertheless, markets pushed aside the ADP figure, and rightly so, as jobs figures came in better than expected at 390k against the forecast of 325k with any dollar volatility being limited. Fed Member Brainard offered the dollar some strength after the single currency weakened as markets believed there may be a pause in rate hikes come September, however the Vice Chair was quick to state that if the data warrants the hike the Fed will respond.

A quiet week from the US as data from across the pond will be quiet until Thursday with unemployment claims due lunchtime and inflation figures on Friday.

Market rates 

Today's Interbank Rates at 09:39am against sterling movement vs Wednesday.

Euro

€1.169 ↓

US dollar

$1.256 ↓

Australian dollar

$1.739 ↓

South African rand 

R19.28 ↓

Japanese yen 

¥164.2 ↑

Have a great day.