GBP
Conservative MPs will vote again on Tuesday as they continue the process of choosing the two candidates for a leader who will be put to a vote of members.
One of the four remaining contenders – Rishi Sunak, Penny Mordaunt, Liz Truss, and Kemi Badenoch will be eliminated when the result is announced later.
Senior backbencher Tom Tugendhat was knocked out after Monday’s vote of MPs.
Already today, UK labour market data for May has been released. The unemployment rate remained at 3.8% in May. Meanwhile, underlying average earnings rose by 4.3% y/y, matching forecasts. The data has not affected the sterling in early trading
USD
The Dollar has been supported ever since last Wednesday’s U.S. inflation print of 9.1%, which was higher than anticipated.
This immediately raised bets the Federal Reserve would be required to accelerate the pace it raises interest rates to slow the economy and cool inflation.
EUR
Euro exchange rates face the prospect of a highly volatile few days of trading as this week contains a mix of the European Central Bank’s policy meeting as well as the planned restart date for the Nord Stream 1 gas pipeline.
The ECB rate decision certainly has the potential to move the Euro, but the expected interest rate rise of a 50bp hike is larger than the market’s currently anticipated 25bp and suggests the ECB is keen to make a rapid start on normalising interest rates.
The wild card for currency markets, therefore, is whether or not Nord Stream 1 is restarted, given it remains Russia’s geopolitical trump card.