IFX Market Report: Tuesday 21st June 2022

The United Kingdom is facing the biggest national rail strike in 30 years. In France, Macron’s defeat at the legislatives cast doubts about his ability to pass reforms. Europe is replacing gas with coal in spite of supply cuts from Russia.

More than 40,000 rail workers are on strike in the United Kingdom as the biggest rail strike in 30 years kicked off today. The dispute lies over pay and jobs cuts and the strikes could cost the industry up to £150m and affect the UK economy in general with thousands of businesses reliant on the rail network but also passengers as customers in shops, restaurants, etc… The London Underground is also mostly closed due to a TfL strike as well over the same reasons. Inflation is the main driver behind the strikes as it reaches almost 10%, and now Prime Minister Boris Johnson is under pressure to help British households face the increasing prices as the industrial action and the inflation could drive the United Kingdom into recession.

In France, Macron is trying to form a working government after losing the majority at the legislative elections, meaning the ruling party will have to find allies to get its reforms through. Six of Macron’s political opponents are expected at the Elysée Palace today, with the exception of Jean Luc Mélenchon from “France Insoumise”. So far, every party in the opposition has expressed a desire to remain in the opposition to Macron’s government, thus casting doubts over the French president’s ability to rule the country effectively for the next 5 years.

In Brussels, the European Commission president has warned EU members over a backtrack on their long-term objectives of cutting fossil energies. Russia has reduced capacity on the Nord Stream 1 pipeline by 60% last week affecting Germany, Austria and the Netherlands. Moscow had already shut down completely or partially gas supplies to Poland, Bulgaria and Romania in prior weeks in response to European sanctions. The EU members states are concerned about further gas supplies with many countries restarting coal-fired power stations like Germany, Austria or the Netherlands, and others like Italy are expected to follow. European gas prices have gone up by more than 50% in the last week, and six times more expensive than before the pandemic.

Cable saw the Pound make small gains yesterday. GBPUSD opened at 1.2228 and close slightly under 1.2239.
EURUSD followed the opposite trend with the pair opened at 1.0532 and closed at 1.0521, marking small gains for the USD.
GBPEUR also saw small movements but small gains from the GBP as the pair opened at 1.1630 and closed to 1.1645.

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