GBP: The British pound partially reversed some of its gains as investors appeared concerned that the Bank of England’s higher interest rates might stifle the country’s economic growth. Despite the restrictive monetary policy, inflationary pressures are still above 8.5% and appear to be well-supported for the British pound. Investors are now focusing on global PMI data to see how interest rates will affect economies around the world. The manufacturing PMI for the UK is predicted to remain in contraction zone for June while showing stability. The question of whether the UK currency’s recovery will last is still open given that growing borrowing prices indicate difficulties for both families and businesses. Additionally, warning signs are being flashed by the gilt market as the yield curve inverts to levels not seen in decades.
EUR: Prior to the release of manufacturing PMI data for the majority of Europe, which is anticipated to demonstrate that this crucial industry is still experiencing difficulties, the euro is having trouble finding support. Germany is really predicted to report a PMI release of 41.0 in June, down from 43.2 in May. Germany has the main industrial base in the eurozone. Joachim Nagel, a policymaker at the European Central Bank, will certainly argue for further interest rate increases to battle inflation even as regional economic growth is slowing in his speech at a financial conference later today. The ongoing unrest in France, the second-largest economy in the eurozone, following a police officer’s killing of a teenager in a suburb northwest of Paris, has also put pressure on the euro. Many analysts are hesitant to take a position on the euro until more information is available on the continent’s underlying economic and socio-political health. This is because tensions in France and Europe are rising and economic data shows that the eurozone economy is still struggling.
USD: After Friday’s losses, the U.S. Dollar recouped some ground in early European trade this morning. In reality, the dollar took a knock at the end of last week as a result of lower-than-expected May inflation statistics, indicating that the Federal Reserve’s year-long tightening cycle was having an effect. Although there hasn’t been much trading this morning due to the holiday tomorrow, dealers have been hesitant to drive the dollar much lower. Furthermore, a tonne of significant economic data that are anticipated later this week may provide additional hints as to whether the U.S. central bank will likely begin raising interest rates after taking a break in June. The U.S. employment report on Friday will ultimately be the highlight of the week. Economists anticipate that the economy added 225,000 jobs in June, which is a slower rate of growth than May’s 339,000 new positions but still a positive outcome. The Fed will also release the minutes from its meeting on June 13–14, when it maintained rates stable after ten consecutive rate hikes.
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