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British government announces its latest Prime Minister. Liz Truss from the Conservative Party has been elected as Boris Johnson leaves office. Prime Minister Liz Truss’ hawkish reputation soon provided an upward boost to GBP/USD.
Meanwhile, US stocks remained closed on Monday amid the Labor Day holiday in the US, causing the trading volumes to maintain at their lows and major pairs to stay within limited intraday ranges. Despite market moves being restricted due to the holiday, the escalating US-China tussles over the trade deal and Taiwan has weighed on market sentiment as the Biden Administration announced its intention to continue with the Trump-era tariffs for now. The market focus now shifts to the US ISM Services PMI for August and a higher-than-expected number could renew the hawkish Fed bets amid the looming recession fears and the escalating geopolitical tension. The extremely hawkish Federal Reserve (Fed) might lead to declining US economic activities, as the unavailability of cheap money has forced the corporate to postpone their expansion plans and decrease investment opportunities.
In the Eurozone, the region’s worsening energy crisis has exerted heavy bearish pressure on the euro and added to the fears of high inflation and monetary tightening. Russian gas provider Gazprom decided to shut down the Nord Stream 1 pipeline last Friday. However, the latest news on Monday reported that Moscow’s decision to cut energy to Europe would continue until Western nations lift sanctions imposed after the Ukraine invasion. Therefore, the halting of energy supplies has worsened the situation for the Eurozone.
Main Pairs Movement
The US dollar was little changed on Monday, failing to extend its upside traction amid a Federal holiday in the US. The DXY index witnessed some buying and climbed to a daily high above 110.2 level during the Asian trading session, but then retreated to the 109.8 area to surrender most of its daily gains. recover most of its daily losses. The expectations for aggressive rate hikes by the US Federal Reserve (Fed) might continue to act as a tailwind for the safe-haven greenback, as the greenback hit a 20-year high against a basket of peers at the start of the week.
GBP/USD advanced higher with a 0.38% gain on Monday as Liz Truss’s win warrants the political instability in the UK economy. Liz Truss has been elected as the next UK Prime Minister after fighting for the leadership of the Conservative Party for more than two months. The GBP/USD pair dropped to a daily low below the 1.145 mark in the late Asian session, but regained positive traction and climbed towards the 1.1520 area heading into the European session. Meanwhile, EUR/USD remained under bearish pressure and retreated to a two-decade low amid the escalating fears of the energy crisis. The pair was down almost 0.05% for the day.
Gold dropped with a 0.15% loss for the day after climbing to a daily top above the $1715 mark during the European session, as the escalating recession fears in Europe and the expectations of aggressive rate hikes by the Fed both undermined the precious metal. Meanwhile, WTI oil extended its intra-day rally and rose to the $90 area during the US session, as OPEC+ unexpectedly agreed to make a token oil supply cut for October.
Economic Data
| Currency | Data | Time (GMT + 8) | Forecast |
| AUD | RBA Interest Rate Decision (Sep) | 12:30 | 2.35% |
| AUD | RBA Rate Statement | 12:30 | – |
| GBP | Construction PMI (Aug) | 16:30 | 48 |
| USD | ISM Non-Manufacturing PMI (Aug) | 22:00 | 55.1 |
