Britain moves forward with PM Truss
Tuesday 6 September, 2022
Daily Currency UpdateBritain’s new Prime Minister was announced yesterday with Liz Truss beating Rishi Sunak with 57% of the votes. Truss will see Queen Elizabeth at Balmoral Castle later this morning to form her government and has promised support for households facing huge power bills.
The new Prime Minister will be faced with uniting the Tory Party as divisions have already been seen. Home Secretary, Priti Patel, resigned hours after the announcement. GBP/USD started to edge closer to the 1985 low of 1.1413 early Monday but stopped short at around 1.1445. GBP/USD has since recovered from these lows on talks that decisive action will be taken by Truss later this week to tackle the UK’s ongoing economic problems. The currency pair has touched 1.1600. GBP/EUR has also recovered from dropping to 1.1570, peaking just under 1.1640.
The UK will release construction data this morning but it’s unlikely to sway the pound. As this is the case, we will have to wait till this afternoon for macroeconomic data with the US releasing ISM and final services PMI between 2:45pm and 3pm. Depending on the result, this may further support the pound’s gains.
Key MoversThe Reserve Bank of Australia (RBA) raised interest rates overnight by a further 50 basis points to 2.35%. The move now sees the cash target rate at its highest level since 2014 and is the fifth increase so far this year. The decision comes as price pressures accelerate in the Australian economy, households face headwinds of higher pay outs, and the inflation rate reaches 6.1% for the second quarter. AUD/USD pushed back above 0.6800 ahead of the news but has dropped back since. GBP/AUD has seen a steady increase over the past 24 hours after Truss was announced as the new prime minister.
The move by the RBA comes ahead of the European Central Bank’s (ECB) Thursday meeting when policymakers are set to authorise a second interest rate hike to fight back inflation. As the RBA met the expected increase in cash rate, pressure will now be on the ECB to follow suit.
- GBP/USD: 1.1510 - 1.1640 ▲
- GBP/EUR: 1.1560 - 1.1660 ▲
- GBP/AUD: 1.6950 - 1.7230 ▲
- EUR/USD: 0.9920 - 1.0020 ▲