At the beginning of the week, the euro and pound are likely to be under selling pressure. In Europe, Russia has not restarted the Nord Stream 1 natural gas pipeline to Europe. Due to the occurrence of a new problem, the company will suspend supply indefinitely until the problem is resolved. European gas prices rose by more than 30% at the beginning of the week, raising concerns about an energy crisis again. The euro/dollar has fallen to the 0.98 level, its lowest level in 20 years.
The pound market is also under selling pressure. At around 8:30 p.m. Japan time today, the results of the run-off election for the leadership of the Conservative Party will be announced. According to preliminary reports, Foreign Minister Truss is leading Finance Minister Sunak by a ratio of 2 to 1. Since this composition has not changed for a while, the line of the election of the new Prime Minister Truss is getting thicker. The question is whether the economic policy will lead to curbing inflation and stimulating the economy. Skepticism is prevalent in the market that the VAT (value-added tax) cut will actually encourage inflation. There are fears that the Bank of England’s monetary tightening stance will be prolonged, and that the recession will be prolonged. The pound/dollar pair was also pushed down to the lower-$1.14 level at one point.
EUR and GBP are selling. If there is a chance, we will consider a sell entry.