Sterling benefits from latest Prime Minister uncertainty

Today's Highlights

• G20 Summit poses market risks

• Can the Euro hang on to its recent wins?

Current Market Overview

Sterling has fallen by over 5% since Theresa May resigned, mainly on fears that the Conservative Party will elect a Eurosceptic Prime Minister. Boris Johnson is the favourite to win the UK leadership race and the Pound has tumbled as a result. News over the weekend has helped to support the Pound, however. Reports of a heated domestic argument between Mr Johnson and his partner and a recording of the disturbance taken from an adjacent flat have rocked Boris’ lead position. Boris Johnson has been the favourite throughout the contest and seemed to have no problem reaching the final two candidates, having received over 100 Tory MP votes at every stage. Can Jeremy Hunt capitalise on this potential fall from grace and win over Conservative Party Members?

G20 summit poses market risks

The upcoming G20 summit in Osaka, beginning on Friday 28th June, will likely be the major event risk for this week, posing risks for Japan and the Euro. High level talks between US President, Donald Trump, and his Chinese counterpart, Xi Jinping, will be a point of focus, because of the implications it has on US-China trade relations. A sour outcome may push EURUSD lower and could reverse some of the currency pair’s recent gains if investors suddenly flock to the US Dollar as a safe haven.

Can the Euro hang on to its recent wins?

The single currency is at the top of its recent trading range this morning, despite the very cautious commentary emanating from the European Central Bank (ECB). Mr Draghi has stated that the ECB will be ready to act if the EU economy continues to falter and that he would be watching inflation closely. A weaker US Dollar has been the focus of market attention, propelling the Euro higher, so this week’s inflation data will be crucial; a weaker number could see the Euro erase some of its recent gains. The all-important German IFO Business Climate Index was released this morning and fell for June, but the Euro has so far emerged unscathed.

Data diary gets more significant later this week

The data diary is pretty sparse today. Tomorrow we have the US Consumer Confidence data due to be released at 2:00pm; and later in the day we have US Federal Reserve’s Jerome Powell discussing the Fed’s outlook on monetary policy. This could have further consequences for the USD. The main event risks this week will be the US-China summit on Friday and before that, the Gross Domestic Product (GDP) data from both the UK and the US on Thursday.