Update: UK Consumer Confidence Falls, But Pound Sterling Exchange Rates Hold Gains
Pound Sterling (GBP) exchange rates extended gains on Thursday morning despite the GfK consumer confidence index showing a decline in sentiment.
The gauge fell from -10 to -12, prompting this response from GfK’s Head of Market Dynamics:
‘Sadly, there’s no festive cheer in this month’s Consumer Confidence Index. This is the second time this year that consumer confidence has matched the worrying -12 score seen in July 2016 after the Brexit vote. This is also the 20th consecutive month where the Overall Index score has come in at a negative value – that’s not good festive news.’
The report might have been gloomy, but Sterling still advanced by over 0.3% against the Euro and US Dollar. GBP/NZD stormed 1% higher on negative news from New Zealand.
Today’s GBP Headlines
Brexit progress speculation boosts Pound Sterling exchange rates – GBP sentiment improves.
GBP/EUR rate jumps 50 pips – Despite wary EU Brexit statement.
GBP/USD rate strikes two-month high – US GDP revised higher.
GBP/CAD rate hits five-month high – Pound to Australian Dollar exchange rate hits 1-year high.
Pound Sterling (GBP) Exchange Rates Soar on Hopes for Brexit Progress
Pound Sterling (GBP) exchange rates continued strengthening yesterday as traders responded positively to speculation that the EU had accepted Britain’s proposal to pay a Brexit divorce payment of around £45 billion.
The feeling is that progress on the exit bill will help unlock discussions on future trade, thereby increasing the chances of Britain securing a transitional deal to prevent a disorderly exit.
The issue of the Irish border remains unresolved, however, the prospect of an agreement being reached before Monday’s deadline was improved by news that Irish Deputy Prime Minister Frances Fitzgerald has resigned.
Fitzgerald’s resignation averted a vote of no-confidence from the opposition that would have led to snap elections – and interrupted Irish border talks.
Pound to Euro (GBP/EUR) Exchange Rate Hits 2-Week High Despite EU Warning
The Pound to Euro (GBP/EUR) exchange rate rallied by around half a cent yesterday to hit a fortnightly high as hopes of Brexit progress bolstered Sterling’s appeal.
While investors have responded positively to speculation that significant progress has been made, European leaders remain wary of collating the Brexit divorce payment with a new UK-EU trade deal.
‘We are not there yet’, said the EU’s chief Brexit negotiator Michel Barnier, suggesting that more needs to be done before the EU will give the go-ahead for talks on future trade.
And if Monday’s deadline passes without a positive statement from the EU then we could see Sterling suffer steep losses versus the single currency.
Today’s session features Eurozone unemployment, which is tipped to hold steady at 8.9%, and Eurozone inflation, which could increase demand for the Euro if it rises from 1.4% to 1.6%, as expected.
Pound to US Dollar (GBP/USD) Exchange Rate Leaps to New 2-Month High Despite Sturdy US GDP Print
The Pound to US Dollar (GBP/USD) exchange rate appreciated by around 70 pips yesterday to strike a new two-month high. Hopes of Brexit progress propelled the Pound, but simmering US sentiment could lead to a correction lower if UK-EU divorce talks break down.
In the US analysts were cheered by an upward revision to third quarter US growth, which saw annualised GDP upgraded from 3.0% to 3.3%.
This equates to quarterly growth of 0.8%, double that of the UK in the same period. Traders were especially happy with the result, which featured sturdy figures for exports and corporate profits, considering that the period was afflicted by serious damage from Hurricane Harvey and Irma.
While Sterling is benefitting from positive Brexit headlines, the threat of a downturn in GBP/USD fortunes, if the negotiations take a turn for the worse, cannot be discounted.
Pound to Canadian Dollar (GBP/CAD) Exchange Rises to 5-Month High
The Pound to Canadian Dollar (GBP/CAD) exchange rate jumped by around 140 pips yesterday to strike a five-month high on optimism surrounding Britain’s Brexit negotiations with the EU.
The commodity-sensitive ‘Loonie’ appeared to soften in response to a slight downtick in global oil prices.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Strikes 1-Year High
Positive Brexit developments helped send the Pound to Australian Dollar exchange rate to a one-year high yesterday, with Sterling registering gains worth around 150 pips.
It will be interesting to see whether GBP/AUD builds on these gains, or whether traders opt to lock-in profit from the recent rise. Much will depend on Monday’s crunch talks with the EU: if European leaders agree that sufficient divorce progress has been made then the Pound could reach fresh peaks, while a negative outcome could prompt steep losses.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Gains 100 Pips
Sterling strengthened by around 100 pips versus the New Zealand Dollar yesterday.
Reserve Bank of New Zealand Governor Grant Spencer said that the bank would be easing home lending restrictions, but analysts concluded that the measures would have limited impact on interest rates, leaving demand for the ‘Kiwi’ largely unchanged following the statement.