Gentium FX | Daily Report - 26th June 2023 - Cautionary Sentiment

GBP: After the Bank of England's rate hike, the British Pound initially gained ground but has since retreated due to the UK government's plan to use fiscal measures to tackle persistent inflation. This has led to concerns about the Conservative Party's reputation, as Finance Minister Jeremy Hunt reversed the promise of tax cuts, fearing that it could worsen inflationary pressures. Additionally, Hunt is engaging in discussions with industry regulators to prevent businesses from raising profit margins, taking advantage of high demand, which is referred to as "greed-flation."

EUR: The Euro showed some strength this morning, recovering slightly from last week's losses when it dropped to a one-week low due to sluggish eurozone business growth indicated by PMI data. Market participants are cautious about betting heavily on the shared currency following the disappointing release of Eurozone PMI prints, which presents a policy challenge for the European Central Bank. The focus now turns to Germany's Ifo business survey, expected to reveal a further decline in business confidence in the largest eurozone economy. However, without significant economic data from the Eurozone or the US, attention will be on ECB President Christine Lagarde's speech for market direction.

USD: The US Dollar weakened in early European trade today but remained near its recent one-week high due to concerns about global growth and the political turmoil in Russia over the weekend. The news of an uprising in Russia initially boosted the dollar, but the situation calmed after a deal was reached with President Vladimir Putin, preventing a march on Moscow. However, uncertainty remains regarding Putin's response to the challenge to his authority. Additionally, the US currency had already been in demand as several central banks, including the US Federal Reserve, indicated their intention to raise interest rates to combat elevated inflation. The hawkish message delivered by Fed Chair Jerome Powell during Congress testimonies has likely supported the dollar.

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