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We have continued to see GBP weakness as Sunak and Truss battle it out to see who will become the replacement for Boris Johnson. With both competitors claiming they will cut taxes to help solve the cost of living crisis it is hard to say who will come out on top. When there is any uncertainty to do with the leadership of the UK government this could potentially cause GBP weakness. The main focus this week will be the interest decision we have coming out on Thursday from the BoE. If rates are hiked which is as expected then this typically encourages people to save instead of borrowing from the banks which tends to slow the economy down and decrease inflation.
As we came towards the end of the week las week we saw the GBP/EUR rate at a 3-month high so this could have been because of GDP figures that came out on Friday and the ongoing issue surrounding the European gas supplies which are drawn from Russia but are being restricted by Moscow in protests over the sanctions been put in place to do with the invasion of Ukraine. This morning we have unemployment figures coming in Europe. If the figures come out higher than expected then this will show an increase in unemployment and could potentially weaken the Euro, however if the figures come out lower than expected this will show that unemployment has dropped and could possibly cause some Euro strength.
Last week we saw the dollar have its best monthly performance since November 2020 finishing the month on a high. However there were rising concerns around the US going into recession after 2 consecutive negative months on GDP figures. Meaning all eyes will be on the data coming out this week for Non-farm Payrolls and Unemployment Rates which will predict the upcoming weeks for the green back. Further to this data, we also have the Manufacturing PMIs coming out which are set to weaken the currency further.
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