The British PM Johnson resigned overnight, as the rebellion within his own party overwhelmed his obstinance and UK markets were relieved. The GBP rallied back above 1.2000, while the UK FTSE jumped over 80 points. He will remain in a caretaker role until a replacement is elected, but now the Conservatives can look to a clear path forward. The EUR went against the trend, falling to fresh 20 year lows and despite a weaker reserve, plunging to 1.0150. ECB accounts revealed members considered a 50 basis point rise for their July meeting, but this horse has not only bolted, but has been around the track and is in the next county.
Market focus will now turn to the important Non Farm Payroll number to be released tonight in the US. Expectations are not high (250,000), but a surprise would certainly impact markets. Unemployment numbers in Western economies are heavily disguised, through Non-Unemployment welfare payments, which do not account for the millions not working, but not registered as unemployed. It is said to be up to 20% of the potential workforce in the UK, for example. This explains the tight labour markets, despite very weak economies. Any hint of reality, in US employment data, will have immediate results on the markets.
A relief rally in commodities allowed the associated currencies to bounce, with the AUD trading 0.6840, while the NZD pushed above 0.6150. Any reversal in market sentiment will kill the recovery.