GBP

Sterling opens today on a stronger footing, slightly up against both the US dollar and the euro, despite damning news for Prime Minister Boris Johnson this morning. In a statement published on Monday, Sir Graham Brady, Chairman of the 1922 Committee, announced that the threshold of 15% of the parliamentary party seeking a vote of confidence in the PM had been exceeded. A ballot will be held tonight to gauge whether Johnson still has a majority backing from his party. The Prime Minister has been under increased pressure over the last month, unable to move on from a report that documented alcohol-fuelled parties at the heart of power when Britain was under strict lockdowns to tackle Covid-19. In spite of the news, sterling has so far seemed unfazed with some news outlets reporting that a loss for Johnson tonight may not be a negative for sterling as the market may view it as a line finally being drawn under the ‘Partygate’ fiasco.

EUR

Traders are set for a quiet day ahead on the euro front due to the Whit Monday bank holiday in Europe. On Friday, the Eurozone’s Retail Sales dropped by 1.3% MoM in April, versus 0.3% expected while on an annualized basis, the bloc’s figures came in at 3.9% in April versus 1.6% recorded in March and 5.4% estimated. Despite the downbeat data, the euro has edged higher this morning as investors look toward Thursday’s European Central Bank (ECB) policy meeting. The central bank looks all but certain to announce that its years of bond-buying stimulus are over and that high inflation means interest rate rises are imminent. With Eurozone inflation continuing to march higher – it hit a record 8.1% in May – markets want more clarity on what comes next which has led to suggestions that the debate is no longer whether the ECB will raise rates in July for the first time in over a decade, but by how much.

USD

The US dollar has opened lower on Monday with a lack of high-impact data to look forward to and a risk-on market sentiment. The market mood was eased when Chinese authorities announced over the weekend that Beijing will allow residents to return to work from Monday and schools will resume from June 13 onwards. Following this, US Commerce Secretary Gina Raimondo reaffirmed on Sunday that US President Joe Biden’s administration is planning to ease tariffs on Chinese imports to battle inflation. Despite the risk sentiment shifting, the dollar has so far been able to cap its losses this morning due to data published late last week. Friday’s Nonfarm Payrolls rose by 390,000 in May, compared to the market expectation of 325,000. The better-than-expected U.S. employment report pointed to a tight labor market that could keep the Federal Reserve on an aggressive path of interest rate hikes.

Economic Calendar

18:00 GBP Prime Minister Boris Johnson Vote of no-confidence