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27th June - Weekly FX Update

Top Currency Pairs Monday 27th June 9:00 UTC GBP/USD: 1.23177 (Last Week: 1.22450) EUR/USD: 1.05845 (Last Week: 1.05268) GBP/EUR: 1.16375 (Last Week: 1.16322)

Market News

Pound Sterling The markets awaited UK inflation figures last Wednesday, but they came in as expected and failed to act as a catalyst for the Pound. At 9.1%, this was still a 40-year high. On Saturday, over 40,000 members of the RMT union went on strike, marking one of the biggest rail strikes in 30 years. Should inflation move further towards the 11% prediction towards the end of the year, this may only be the start of industrial tension. Recent talks broke down, with the RMT union accusing the government of "wrecking" the progress in RMT's aim to receive at least a 7% pay rise. The Pound will remain under pressure until a resolution is found, but the EU and US face their own respective problems due to Russian gas imports and reduced inflation fears.

Euro Economic research from Rabobank has suggested that the latest Russian energy embargo will likely tip Europe into a mild recession, with predicted growth of -0.1% in 2023. The sixth set of sanctions is yet to be signed off, but imports of Russian oil by sea will be halted by the end of the year. The curtain is quickly coming down on Russian oil to the EU as they scramble for alternative solutions, with a lift on coal production potentially alleviating a winter energy crisis. German inflation will be key this week, with many believing that the European Central Bank needs to take swift action on getting inflation under control. Inflation in the EU hit a record high of 8.1% last time out, and this week's German figures will see if it can build on its own 7.9% highs.

U.S. Dollar The Dollar slipped last week and is set for its first weekly decline this month after falling oil and commodity prices eased inflation fears. This prompted investors to reduce bets on where interest rates may peak over the coming quarters. Some analysts have suggested the "peak Dollar" may be near which would be an important turning point. At present, the Federal Reserve is committed to taming inflation as Chair Jerome Powell reiterated during his testimony last week, stating the need to "restore price stability". It is expected that an additional increase of 75bps would be appropriate at the next meeting, with 50bps hikes at subsequent meetings as long as there is supporting data. After surprisingly weak PMI data last week, the next lot of data releases will be pivotal in seeing if the Fed has finally reached peak hawkishness which has been underpinning the strength of the Dollar for such a long time.

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