- Pound (GBP) rises as leadership battle heats up
- UK GDP due on Thursday
- Euro (EUR) falls on energy worries
- Nord Stream 1 repairs start, will Russian gas be switched back on after?
The Pound Euro (GBP/EUR) exchange rate is heading higher at the start of the week adding to last week’s gains. The pair rose +.8% last week, settling on Friday at €1.1806, after trading in a range between €1.1589 – €1.1851. At 08:45 UTC, GBP/EUR trades +0.14% at €1.1810.
The pound pushed higher last week after Prime Minister Boris Johnson was forced to resign last week. The Conservative leader was forced to resign after months of scandal and as the country faces a challenging economic outlook.
There are eleven candidates that have thrown their hats into the ring and the number appears to be growing quickly. Most candidates are supporting a cut in taxes, particularly corporate taxes, in order to try to boost economic growth. However, cutting tax rates could be considered inflationary.
There is no high impacting UK economic data due to be released today. Looking ahead the key focus this week will on UK GDP data which is expected to show an improvement in May after unexpectedly contracting by -0.3% in April. The UK economy also contracted by 0.1% in March. Even if GDP does push marginally higher, the outlook for economic growth is still dire.
The euro fell last week and continues to trade under pressure amid growing concerns over the health of the Eurozone economic outlook and amid rising fears over energy security for the region. Nord Stream 1 is being shut off for scheduled repairs. However, the fear is that Russia won’t turn gas supply back on.
Separately Russia’s Gazprom has said that it will cut Italy’s gas supply by a third, which comes as supply has already been slashed by around a half since mid-June. This comes as Italy struggles with droughts and heatwaves which are hitting power generation. Fall gas supplies could reduce industrial output ad accelerate the move to recession.
There is no high impacting eurozone data due today.
