UK Consumer Confidence Drops – Pound (GBP) Exchange Rates Left Floundering
Pound (GBP) exchange rates remained trading within a narrow band on Wednesday morning, climbing and falling against a basket of the majors amid a drop in British consumer confidence.
According to figures from the research house GfK, consumer confidence dipped to -10 in February, down from January’s reading of -9 but on par with the forecast.
This illustrates households are increasingly pessimistic about their finances and indeed the wider economy, with concerns regarding poor household income and rising prices putting a tight squeeze on consumers’ wallets.
On the Brexit front markets are currently assessing the ongoing issue of the Irish border, with the EU’s latest draft of treaty proposals calling for Northern Ireland to remain part of the customs union – an eventuality that would leave them subject to the European Court of Justice.
Downing Street, however, has stated that the UK will not sign up to anything that ‘threatens the constitutional integrity of the UK’, warning against the prospect of a hard border in Ireland.
GBP/EUR Exchange Rate Remains Constricted despite Mixed Eurozone Data Releases
The Pound Euro (GBP/EUR) exchange rate lingered around opening levels on Wednesday morning as markets reacted to some mixed data releases from the bloc.
With respect to the good, Germany’s unemployment rate remained unchanged at 5.4% in February – the lowest level seen since German reunification in 1990 – though the jobless total notably dropped by 22,000 to 2.393 million.
With respect to the bad, however, the bloc’s year-on-year flash inflation estimate for February printed at 1.2%, down from the previous estimate of 1.3%.
This fall was the third in three months, with Eurostat reporting that the drop was expected on the back of subdued German figures.
This is far below the European Central Bank’s (ECB) target range, though markets are now quite used to the notion that the central bank will not be adjusting policy for some time.
GBP/USD Exchange Rate Tumbles on Hawkish Comments from US Fed Chairman Powell
The ‘Greenback’ continued its rally into Wednesday morning, supported by yesterday’s run of optimistic remarks from US Fed Chairman Jerome Powell, and a soaring consumer confidence index reading.
Mr Powell pledged to prevent the economy from overheating, whilst also sticking with plans to gradually raise interest rates.
More notable, however, was his response to a question from Rep. Carolyn Maloney, who asked about the possibility of more than three rate hikes this year.
‘At the December meeting, the median participant called for three rate increases in 2018. Now since then, what we’ve seen is incoming data that suggests a strengthening in the economy.’
This statement was construed by the markets as an indication that perhaps more than three rate hikes would be justified, a sentiment that has found greater support in recent weeks on the back of accelerating US wage growth, higher-than-expected inflation readings and record low unemployment rates.
This optimism is also reflected in the US consumer confidence reading which soared to 130.8, up from the previous 124.3 and the forecast of 126.5.
GBP/CAD Exchange Rate Down on Canadian Budget Release
The Pound Canadian Dollar (GBP/CAD) exchange rate fluctuated on Tuesday, posting a mixed performance on the back of the latest US Dollar strength and Canada’s latest Federal Budget Release.
Looking ahead, markets will be keen to assess the Canadian raw materials price index for January, which should provide an insight into the path of future inflation.
GBP/AUD Exchange Rate Slips despite Disappointing AUD Private Sector Credit Reading
The Pound Australian Dollar (GBP/AUD) exchange rate pared recent gains on Wednesday, falling on the latest controversy of the EU’s latest draft of Brexit withdrawal proposals.
This occurred despite a drop in Australia’s private sector credit reading, which printed at 4.9% year-on-year in January, down from the previous period’s 5.0%.
Looking ahead, markets will be keen to assess Australia’s AiG performance of manufacturing index reading, due later today, for a better indication of Australia’s private sector performance.
GBP/NZD Exchange Rate Rises, Unperturbed by Upbeat NZ Business Activity and Confidence Readings
The Pound New Zealand Dollar (GBP/NZD) exchange rate jumped on Wednesday, supported by rising risk appetite amongst the markets and seemingly unperturbed by a run of upbeat New Zealand ecostats.
According to figures from statistics New Zealand, the NZ business activity outlook rose from a score of 15.6 to 20.4 in February, with the business confidence reading rising from -37.8 to -19.0.
This bodes well for New Zealand’s private sector, with industries largely untroubled by the possibility of the new Labour-led governance implementing problematic policies.
This week the US Dollar was touching three-year highs when valued against a basket of major currencies. The greenback’s traditional role as one of the safe-haven currencies is helped by a domestic economy that is largely immune to the threats of the coronavirus.
Last update: 22 Feb, 2020
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