FTSE & GBP Rally As UK Leadership Contests Liz Truss As New PM

The confirmation of Liz Truss as the new leader of the UK Conservative party, and consequently the new UK PM, has been met with a rally in GBP. Following much uncertainty ahead of the results, GBP seems to be buoyed by Truss’ pledge to spend £130 billion addressing the energy-price crisis in the UK via price caps on energy bills.

While critics of Truss’ proposed spending plans warned that such measures risked feeding into higher inflation in the UK, the proposed price caps have been welcomed as a way of both diluting soaring energy prices along with avoiding a further spike in inflation. While the details of the plan are yet to be fully outlined, GBP is enjoying better trading for now at least.

Key Factors for Today

- USD softens from recent highs – US markets return from bank holiday today – ISM Services in focus today
- Risk markets rebound amidst USD soft-patch
- FTSE & GBP rally as new UK PM Truss confirmed
- RBA hikes rates by further 50bps – signals more to come
- Metals and oil rally – Crude lifted by OPEC+ production cut

Coming Up

- USD US ISM Services PMI
- GBP UK Construction PMI
- NZD New Zealand GDT price index

Equities Rebound as USD Drops uyt

Equities markets are seeing a better open again today. With longer the US Dollar pulling back y initial highs on the week, asset prices have seen better demand. US markets return from the bank holiday today so it will be interesting to see whether the current dynamic continues or reverses.

FTSE Boosted by UK PM Confirmation

The FTSE has been well-bid today, enjoying a relief rally on the back of the leadership change finally being confirmed, and is now almost 3% higher off last week’s lows. Today, the main focus will be on the IS ISM services PMI. A strong upside surprise would likely help revive the Dollar here, leaning on equities prices, while any weakness might see USD drop further, driving equities higher over the day.

EUR & GBP Lead in FX, Safe Havens Soften

In FX, the step-back in USD has seen EUR and GBP taking centre-stage. GBP is rallying on the back of the leadership change in the UK, while EUR is being driven higher ahead of the ECB on Thursday. Overnight, the RBA hiked rates by a further 50bps and signalled more to come as it focused on surging inflation. Rates are now at 7-year highs, having been hiked for a fifth consecutive meeting. Safe havens and JPY have been among the weaker performers so far today, with demand diluted by the rebound in risk sentiment.

Metals & Oil Rally – Crude Boosted by OPEC+ Production Cut

In the metals and commodities space, gold and silver are both higher today, along with oil, benefiting from the drop in USD. Oil prices have been lifted by news that yesterday that OPEC+ agreed a small production cut (100k barrels per day) from next month. Looking ahead, the group also agreed that the Saudi Arabia (the de-facto leader) can call an emergency meeting anytime, if volatility persists.