Yesterday, Chancellor Rishi Sunak announced an "Energy Profits Levy" yesterday on oil and gas firms to finance a plan that will help every household in the UK get a £400 bill discount this October. In the United States, weekly jobless claims show positive signs after a disastrous beginning of the year as the country enters recession and Europe plans for a risk that Russia might cut gas supply this year.
The United States entered recession the first quarter of this year with data coming out yesterday that GDP QoQ for Q1 came out at -1.5%. The beginning of the year saw American companies struggling to recruit new staff and therefore saw an increase in wage expenses to attract new recruits, as well as big drop in homes sales with high interest rates. However, with initial jobless claims coming out slightly better than expected as well yesterday, markets are optimistic about a return to normal in the job market, with inflation still the main factor driving fear.
In the United Kingdom, Chancellor Rishi Sunak announced a £15bn plan set to help every UK household get an energy bill discount of £400, after the energy price cap rose from £800 to £1,971 in April, and is set to rise to about £2,800 in October. The plan should be partly financed by an “Energy Profits Levy”, which is effectively a windfall tax, of 25% on oil and gas firms profits which have seen their profits soar in recent months. The plan divides even among the conservatives as many predict this windfall tax will necessarily affect jobs and investments. The chancellor also announced a set of measure to help eight million households on means-tested benefits, as well as pensioners and individuals with disability.
Europe is developing a contingency plan in the eventuality of a Russian cut of gas imports, the EU’s energy commissioner, Kadri Simson, said. Russian state-owned gas company Gazprom has already cut gas supplies to Bulgaria, Finland and Poland as they refused to pay their bills in roubles instead of euros or dollars. Mr Simson explained the EU is storing as much as gas as possible and have the means to replace most of Russia’s deliveries this year but a full disruption of supplies would necessitate larger actions to avoid taking more drastic measure such as rationalising gas supplies.
Cable saw some gains yesterday as a GDP data from the US were disappointing as well as pending homes sales which saw a decrease of -3.9%.
GBPUSD opened at 1.2586 and close slightly under 1.2603.
GBPEUR remained stable yesterday as the pair opened at 1.1777 and closed to 1.1742.
EURUSD saw slight gains as USD weakened over poor economic results with the pair opening at 1.0707 and closing at 1.0721.
