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  • richard evans

GBP supported despite Johnson confidence vote

Good morning

A little late this morning due to an early physio session.

I hope you all had a wonderful long weekend. We certainly did this end, I have to confess I was one of those who had to check what day it was over the weekend, it all became a bit of a muddle. It did rain, heavily at times, but I think most jubilee celebrations managed to stay in the dry. Even the pageant yesterday dodged the rain, just as well looking at some of the costumes and puppets, not sure how they would have fared in heavy rain.

So the jubilee celebrations come and go and attention switches from one leader to another, Boris Johnson. A confidence vote has been announced for today after at least 54 Tory MP’s asked for it. At least 180 MPs will need to vote against Johnson to trigger a leadership change, as such it is expected he will remain in power but it will be interesting to see the numbers. If there were to be a change in leadership I’m not sure who would be up to the job, but perhaps with Covid and Brexit sort of out of the way, the Tories have a couple of years until the next general election to get back on track and start building for the future.

The announcement of the confidence vote has had little negative impact on GBP, with GBPUSD up at 1.2570 and EURGBP now 0.8550 (GBPEUR 1.1695). Although GBP is a little stronger against EUR it still remains towards the lower end of recent ranges.

Fridays US employment numbers beat expectations with a headline +390k vs expected +325k which initially led to a bit of dollar strength before reversing, but then reversed once again and the US dollar currently trades a little higher than pre-announcement levels.

An extremely light calendar today, but it does get more exciting as we move into the week with EU GDP Wednesday, US CPI Friday as well as the ECB rate announcement Thursday. No change is expected but there is a growing feeling we will see a move higher in rates at the meeting on 21st July. We won’t have any Fed officials speaking as we move into the blackout period ahead of the next FOMC meeting on 15th June.

I mentioned above Covid being ‘sort of out of the way’, however I do note that in several countries including US, India and of course China, case numbers are still high. In San Francisco a mask mandate has been reinstated in an attempt to control infections rates.

To Ukraine where I have to say it seems Russia is gaining the upper hand although to be fair I have little to base this on other than a general feeling. Putin warns that it will attack more targets if the West arm Ukraine with longer range weapons. Russia did fire missiles at Kyiv, they say targeting tanks and other hardware supplied by the West. With more arms said to be flowing from the West it would not be a surprise to see increased missile attacks outside Eastern Ukraine.

RBA rate announcement due in the early hours of tomorrow morning. A 25bps raise to take rates to 0.6% is expected although there are some calls for a 40bps raise to lift rates to 0.75%. Given other central banks have been looking at 50bps moves recently I would not be at all surprised to see the larger move. AUD remains supported with AUDUSD 0.7225, AUDNZD 1.1060 and GBPAUD down at 1.7400.

- 00.01 UK BRC shop prices

- 00.30 Japan household spending

- 05.30 RBA rate announcement

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