 Sterling came under heavy pressure today, tumbling sharply alongside a selloff in UK government bonds. The 10-year gilt yield surged above 4.65%, up 20 basis points from levels seen just two days ago. The moves came after Prime Minister Keir Starmer’s government backtracked on key parts of its welfare bill to avoid a major Labour rebellion. The retreat may have salvaged the vote, but came at the cost of credibility. More importantly. uncertainty is also swirling around Finance Minister Rachel Reeves, after Starmer failed to affirm her job security during a heated parliamentary exchange today. Meanwhile, from the US came a shock downturn in ADP employment, which posted a -33k print for June — the first monthly contraction since early 2022. The data has cast a shadow over Thursday’s non-farm payrolls, with markets now bracing for possible downside risks to the labor market. While July remains unlikely for Fed to resume cutting rates, further downside surprises in job creation or wage growth would likely make the FOMC’s decision a much tighter call. Overall in the currency markets today, Sterling is by far the weakest major while Kiwi and Aussie are also under pressure, pointing to a broader risk-off tilt in markets. Euro and Yen are trading in the middle of the pack. Dollar is currently the strongest, recovery from its near term losses. Loonie and Swiss Franc follow..... |
