Pound Sterling Weakens as Bank of England Report Warns Over Slowing Consumer Spending
The Pound was on poor form virtually across the board yesterday, after a new report from the Bank of England (BoE) warned that weakened consumer spending had given rise to ‘some evidence of financial distress in retail and leisure’ sectors.
Additionally, separate data from the Confederation of British Industry (CBI) showed a surprise decline in retail sales during March, with the index falling negative for the first time in five months.
Today’s net consumer credit figures for February could give an insight into consumer confidence, as households are more likely to take out credit if they are feeling optimistic about the economic outlook.
Global Trade War Fears Enable GBP/EUR Exchange Rate to Cling to Opening Levels
The GBP/EUR exchange rate was able to hold onto opening levels yesterday, with poor demand for the Euro preventing Sterling from performing as weakly against it as it was against its other major peers.
A surprise rise in the GfK German consumer confidence index for April from 10.8 to 10.9 was not sufficient to bolster the Euro, with market fears of a trade war weighing on demand for the common currency. This was in response to comments from Beijing that the Chinese government plans to levy retaliatory tariffs against US goods in response to President Donald Trump’s suggestion of tariffs on around US$60 billion worth of Chinese goods.
Today’s German consumer price index is expected to show an increase year-on-year, but on a month-on-month basis it is predicted to remain flat. This may not do anything for the Eurozone inflation outlook and could therefore weaken the Euro.
GBP/USD Exchange Rate Slumps after Stronger-than-Expected US GDP Revision
The Pound fell by over half a percent against the US Dollar yesterday after even stronger-than-expected fourth-quarter GDP data for the States was released.
Economists had expected initial predictions for 2.5% growth to be revised higher to 2.7%, but the updated figure proved even more bullish at 2.9%. This greatly overshadowed a marginally worse-than-expected deficit in the advance goods trade balance for February.
The US Dollar was also boosted by safe-haven demand as markets feared an escalation of the trade tensions between the US and China.
The Federal Reserve’s favourite measure of inflation, personal consumption expenditure, is set for release today. An increase in spending here could significantly boost the US Dollar.
Hopes of Solid GDP Reading Boosts Canadian Dollar; GBP/CAD Drops
Oil prices were falling, the Canadian data calendar was empty, trade war fears were high and the US Dollar was strong, yet the Canadian dollar put in a solid performance yesterday.
The GBP/CAD exchange rate made strong losses yesterday, with markets hopeful for a solid GDP reading from today’s Canadian growth data, even though forecasts are expecting a minor year-on-year slowdown.
An unchanged pace of month-on-month expansion may be sufficient to keep the Bank of Canada (BOC) on its toes and therefore keep the odds of further rate hikes in the near-term elevated.
GBP/AUD Falls from Post-Referendum High despite Uncertainty over Global Trade
Despite the numerous global uncertainties, strong US data, and a lack of domestic releases, the Australian Dollar pushed Pound Sterling lower.
The GBP/AUD exchange rate was on the decline after having struck its highest level since the referendum. Markets had identified the weakness in the Australian Dollar and were taking the opportunity to speculate heavily that the long decline seen for the ‘Aussie’ is bottoming out. This fresh wave of demand drove AUD higher.
Weakening Chances of Global Trade War Failed to Prevent GBP/NZD Exchange Rate Advance
The New Zealand Dollar was on weak form yesterday, which allowed the GBP/NZD exchange rate to hold onto opening levels. As well as all of the numerous global developments weighing on demand for the high-risk ‘Kiwi’, a slight worsening in the ANZ business confidence reading for March further incentivised markets to sell.