UK Consumer Confidence Rises in 2018, Pound (GBP) Exchange Rates Fluctuate
The Pound meandered up and down against the majors on Wednesday morning, bolstered by an upbeat UK consumer confidence reading and comments from Bank of England (BoE) Governor Mark Carney but limited by shocking news regarding the private outsourcing company Capita.
British consumers began 2018 feeling a bit more optimistic about their financial situation in the coming year, although the news did little to bolster the Pound (GBP).
According to the research house GfK, consumer confidence in the UK lifted from the previous period’s -13 to a score of -9 in January, beating the forecast of -13 and providing a slightly more optimistic outlook for the immediate future of Britain’s economy.
Nevertheless, this score is still below the -5 reading that markets recorded this time last year, and in the absence of good news regarding rising wage inflation and falling consumer prices, there is still potential for this to be a temporary blip rather than a clear sign of recovery.
In other news, shares in the UK government contractor Capita plunged over 40% after a profit warning from the company. Capita’s new CEO unveiled a radical overhaul of the outsourcing behemoth, suspending dividend payments and promising to reduce the company’s ‘complexity’. The revelation comes only a few weeks after the collapse of construction giant Carillion, which bears many similarities to Capita.
This news is another blow to Britain’s shaky outsourcing sector, negating the effects of the upbeat consumer confidence reading and hurting demand for the Pound.
GBP/EUR Exchange Rate Tumbles despite fall in Eurozone Inflation
The Pound Euro (GBP/EUR) exchange rate stumbled on Wednesday morning as markets reacted to some mixed data releases from the bloc.
With respect to the positive news, German unemployment hit a fresh record low in January, whilst Italy similarly recorded its lowest jobless rate since the worst of the Eurozone crisis.
According to data from the German Federal Labour Office, unemployment in Germany fell from 5.5% to 5.4%, with the Labour Office reporting that ‘the demand for new employees remains at a very high level’.
On the negative side of the scales, consumer prices in the Euro Area continued to disappoint, this time falling year-on-year in January from 1.4% to 1.3%.
It should be noted, however, that the core inflation reading – which excludes the prices of food and energy –accelerated in growth from 0.9% to 1%.
Nonetheless, these readings are still significantly below the bank’s target of 2%, thus the potential for a hawkish move by the European Central Bank (ECB) continues to be extremely poor.
GBP/USD Exchange Rate Limited Ahead of FOMC Rate Decision
All eyes are currently focused on the imminent US FOMC rate decision , with markets remaining cautious.
The US Fed is not currently expected to raise interest rates at this meeting, but investors will still be interested to see whether the language employed in the bank’s accompanying statement differs to that used in previous releases, or indeed if Fed Chair Janet Yellen’s remarks are construed as being hawkish or dovish in nature.
Some Fed policy makers have also previously suggested that the central bank could have been overly-pessimistic in dismissing the impact of the Republican tax reform.
If this proves to be the case, then the new statement could reflect a fresh shift towards optimism.
The Pound US Dollar (GBP/USD) exchange rate, however, remains within a narrow band in anticipation.
GBP/CAD Exchange Rate Tumbles Ahead of Canadian GDP Figures
The Pound Canadian Dollar (GBP/CAD) exchange rate tumbled on Wednesday morning as markets reacted to reports that the US will most likely not be exiting the North American Free Trade Agreement (NAFTA) – even with talks remaining divisive.
According to trade observers very little headway has been made in talks, with the US, Canada and Mexico still at odds over various key sticking points. At the same time, US President Donald Trump has acknowledged that he is facing a lot of internal pressure from fellow Republicans and business groups to remain within the trade agreement.
Looking ahead, Canada’s gross domestic product (GDP) figures will be released today, with markets expecting the year-on-year growth rate for November to remain at 3.4%.
The month-on-month figure, however, is expected to climb from 0.0% to 0.4%.
GBP/AUD Exchange Rate Holds Steady as AUS Inflation Remains Low
The Pound Australian Dollar (GBP/AUD) exchange rate remained steady on Wednesday morning as markets responded to some disappointing Australian inflation figures.
Australia’s inflation rate printed at 1.9% year-on-year in the fourth quarter of 2017, up from the previous period’s 1.8% print but lower than the consensus expectation of 2%.
Quarter-on-quarter AUS inflation printed at 0.6%, missing the forecast of 0.7%.
In other news, Australia’s private sector credit reading for December contracted year-on-year from 5.4% to 4.8%, missing the forecast of 5.2% and boding poorly for the economy.
Combined, these readings could scupper any near-term possibility of a rate hike from the Reserve Bank of Australia (RBA), though Australia’s AiG performance of manufacturing index release, due later tonight, could put the GBP/AUD exchange rate under fresh pressure.
GBP/NZD Exchange Rate Resumes Fall on Upbeat NZ Trade Surplus
The Pound New Zealand Dollar exchange rate resumed its fall on Wednesday, dropping as the US Dollar (USD) weakened and risk appetite grew once again.
Lacking fresh ecostats from New Zealand, markets continue to factor in the recent impressive New Zealand trade surplus reading. Looking ahead, Thursday’s ANZ Roy Morgan consumer confidence readings, visitor arrivals figures and building permits numbers could cause fresh movement in this pairing once again.