Markets welcome Sunak's energy rebate
Towards the end of last week, the chancellor of the exchequer, Rishi Sunak, announced a substantial fiscal package to households that are feeling the pinch of soaring energy bills in the UK. The move has been welcomed by the majority and has put an initial positive spin on the Pound. The shift in stance by the Government may have political motivation, but it does bring with it economic plus points.
After May showed a record low in consumer confidence within the UK, June should show a much brighter picture due solely to the rebate news. This is an important driver and catalyst for the UK economy, as we are a services nation. If confidence is high, people spend money, the economy grows, the Pound gains in value. The boost could also play a part in bringing inflation lower and may even allow the BoE to raise rates more than anticipated this year (good news for £).
China has announced further easing of restrictions in both Shanghai and Beijing over the weekend, prompting investor sentiment to turn more positive. Chinese growth concerns have been crippling the high-beta currencies (GBP) the last 6-weeks, but things seem to have turned a corner here with £-$ rates being the proof of that (1-month high).
With US markets closed today and the UK facing two-bank holidays later in the week, there will be a lot less liquidity in the FX market this week. Even with the month coming to an end tomorrow (open and closed trade positions), there shouldn't be much volatility to navigate. In terms of economic data, tomorrow is the only key event with EU inflation readings that are expected to show little change.