The United Kingdom’s political crisis continues with over 50 government officials resigning since Tuesday evening as Boris Johnson clings to power. Ministers for Technology, Treasury, Security, Northern Ireland, Wales, and more have resigned. This morning, Nadhim Zahawi, the new appointed chancellor in lieu of Rishi Sunak who resigned Tuesday; publicly called Boris Johnson to resign. Boris Johnson will resign today but this unprecedented revolt against the Prime Minister from his own party has led cable to lose about -1.5% since Tuesday, going from 1.2108 to 1.1930 as of closure yesterday, and led the conservatives into a deep crisis.
The dollar index, which measures the greenback against six major currencies, is up 12% in 2022 as markets fear a global recession and hold on to the dollar a safe haven asset. Investors believe the Federal Reserve should continue raising interest rates more aggressively than many other global central banks as it faces the worst US inflation in decades, making the dollar more attractive for investors looking for yield.
The Euro traded as low as $1.0165 yesterday afternoon as fears of a recession or stagflation mount. Uncertainty about energy supply to the bloc and bad economic results throughout the Eurozone have led the euro to make significant losses against major currencies. The ECB hasn’t increased yet its rate as bond yields have been soaring for some of the weakest EU-members economies, but is expected to do so in the coming days or weeks.
The Swiss National bank shocked the markets last month by delivering its first interest rate hike in 15 years. The SNB increase its rate by 50 basis points and sent the Swiss franc to break the support line and then the parity with the Euro, with now the EURCHF rate standing 0.9880 as of closure yesterday.
Cable continued its losses yesterday. GBPUSD opened at 1.1959 and closed at 1.1930.
GBPEUR sees the euro lose again despite the turmoil in the UK as construction PMI and EU Economic forecast come to shade a dark light on the eurozone. The pair opened at 1.1646 and closed at 1.1708.
EURUSD follows a similar trend with the pair opening at 1.0268 and closing at 1.0181.