Gentium FX | Daily Report - 27th June 2022- Pound Strengthens Against Dollar and Euro

The Pound has kept most of its strength as the market seems to recognise that the issues faced in the UK are also being seen in the Eurozone and USA. Today, MPs will vote on new legislation that will give ministers the power to get rid of parts of the post-Brexit deal with the aim of making the flow of goods smoother between Northern Ireland and Great Britain. Foreign Secretary Truss believes the Northern Ireland Protocol in its current form is undermining peace in Northern Ireland, with the EU suggesting that this move breaches international law. It is likely most of this is already priced into the rates, but fresh volatility cannot be ruled out.

Last week, disappointing Eurozone and German PMI figures revived fears of a potential recession on the continent. The market has repriced its ECB rate expectations, now pricing in less than a 150 basis points increase by the end of the year, down from 170 basis points earlier last week. EU members are reportedly discussing a bank on imports of Russian gold. If this does happen, geopolitical tensions will be even higher which is likely to keep the Euro on the retreat. ECB President Lagarde will be speaking later today, which will cause some short-term volatility.

The Dollar has weakened across the board as the risks of recession in the US has been discussed, including by Federal Reserve Chairman Powell recently. As a result, the market has re-priced its rate expectations by the Federal Reserve. The market will pay close attention to speeches made by FOMC members to see what their thoughts are on the possibility of a recession.?