The pound is among the top perfomers on Monday and EUR/GBP dropped below 0.8550, on the day PM Boris Johson will face a confidence vote. According to analysts from Rabobank whether or not Johnson remains in his place, “GBP investors will be hoping it will clear the air and allow government to move on with the job in hand”.
“GBP is the best performing G10 currency on a 1 day view as the news of a confidence vote in PM Johnson gives way to hope that UK politics could be on the bring of pushing beyond scandal and distraction.”
“The Tory party did not perform well at last month’s local elections and there is speculation that two approaching by-elections could further highlight voter dissatisfaction with the government.”
“While the pound has found some support this morning on the hope that today’s confidence vote could clear the air and result in more directional leadership for the UK government, we see GBP as still undermined by UK fundamentals. Insofar as the UK has a current account deficit, the GBP is more likely to be sensitive to a perceived deterioration in economic fundamentals that it would be otherwise. EUR/GBP has never returned to its pre-Brexit referendum levels and the softer pound since mid-2016 tallies with the weak investment data in that period. We retain a 3 month forecast of EUR/GBP0.86.”
GBP/USD retreats below 1.2550 ahead of UK no-confidence vote
GBP/USD trades around 1.2530 as the focus shifts to inflation. Members of the UK Parliament will take part in a vote of no-confidence against Prime Minister Boris Johnson later in the day. Meanwhile, US stocks post strong gains after the opening bell.
EUR/USD pierces 1.0700 as dollar recovers
EUR/USD stays on the back foot in the second half of the day and trades below 1.0700 as inflation-related concerns undermine the market’s mood. The dollar stays resilient against its rivals supported by the 10-year Treasury yield surging above 3%.
Gold retreats below $1,850 as US yields push higher
Gold came under renewed bearish pressure in the second half of the day and fell below $1,850. The benchmark 10-year US Treasury bond yield continues to push higher and was last seen gaining more than 2% above 3%, weighing on XAU/USD.