China is facing a recession in Q2 with GDP figures show the Asian giant’s economy contracted by -2.6%, worse than the -1.5% contraction expected. Year on year growth saw the economy grow by 0.4%, again worse than the 1% expected. The disappointing figures come as Beijing applies a zero-covid policy in its cities, and with important industrial and financial centres like Shanghai, Beijing, or Shenzen facing Covid-19 outbreaks in the spring, millions of inhabitants were under strict measures and factories closed. A new outbreak at the end of June saw big cities like Hong Kong, Macau, Shanghai and Xi’an return to strict lockdown measures. These measures saw China’s PMI fall in the spring with most industries in contraction. The good news comes from retail sales, which have risen by 3.1%, recovering from a prior slump.
Italy is facing once again political instability with prime minister Mario Draghi seeing his resignation rejected by president Sergio Mattarella. Draghi said on Thursday he would quit as Italy’s PM after the Five Star Movement refused to adhere to a confidence vote earlier in the day. The political party is one of the parties in the coalition government led by Draghi, had already opposed a decree aimed at fighting inflation and lowering energy costs in a country that has one of the highest energy costs in Europe.
Italy is also facing a bond yield rise with inflation that has contributed to the ECB conservative approach with interest rates, with the fear that growing interest rates may lead the country into a position where it struggles to repay its debts. Mario Draghi is also the former president of the ECB and his position as Italy’s prime minister is what ended a decade of instability after Silvio Berlusconi’s depart with promises of reforms reassuring both his party’s coalition and Brussels.
In the United Kingdom, the Tory leadership race continues as Attorney-General Suella Braverman was eliminated in the second round of the voting on Thursday. She gave her backing to Liz Truss who came in third behind Penny Mordaunt in second, and Rishi Sunak in first position.
Cable saw the dollar gain again yesterday. GBPUSD opened at 1.1891 and closed at 1.1822.
GBPEUR saw the GBP lose some momentum once again. The pair opened at 1.1818 and closed at 1.1798.
EURUSD saw a drop with the pair losing -0.44% yesterday. EURUSD opened at 1.0061 and closed at 1.0016.