The dollar hit a two-decade high against the euro as European stock markets tumbled amid growing fears the continent could lead the world into recession. In the United States, the two-year Treasury yield fell below the 10-year yield, a reliable market signal of a recession limiting medium-term growth.
The pound hit a two-year low of $1.1898 despite excellent PMI results, after the resignation of two of Britain's top government ministers put Prime Minister Boris Johnson's leadership under renewed pressure. Chancellor Rishi Sunak and Health Secretary Sajid Javid have resigned yesterday from the government over disagreements and a new controversy, with Rishi Sunak stating in his resignation letter “Our country is facing immense challenges. We both want a low-tax, high-growth economy, and world-class public services, but this can only be responsibly delivered if we are prepared to work hard, make sacrifices and take difficult decisions. I firmly believe the public are ready to hear that truth. Our people know that if something is too good to be true then it's not true. They need to know that whilst there is a path to a better future, it is not an easy one. In preparation for our proposed joint speech on the economy next week, it has become clear to me that our approaches are fundamentally too different.”
The Euro has lost 10% versus the dollar this year and closed at 1.0261 yesterday after fears of a recession are increasing in Europe and dollar remains attractive as safe-haven asset. German finance minister announced last week rationing gas could become a reality with gas supplies cut by Russia, and prices multiplied increased by 465% in just a year. Norwegian oil workers have also gone to strike which could take out 292,000 barrels of the of the oil equivalent of natural gas out of the market. The ECB hasn’t’ increased interest rates as of yet, with many countries already struggling to repay debt, but is expected to do so this July.
Cable saw the pound plunge yesterday after political turmoil. GBPUSD opened at 1.2108 and closed at 1.1957.
GBPEUR saw the Euro lose again on the pound after fears of gas shortage and inflation mount. The pair opened at 1.1618 and closed at 1.1645.
EURUSD saw the Euro lose -1.49% versus the dollar for similar reasons and because of a dollar appreciation thanks to its safe-haven status. The
EURUSD pair opened at 1.0419 and closed at 1.0266.
