Pound on Downtrend Today in anticipation of Latest UK GDP Report
Ahead of today’s third quarter UK Gross Domestic Product the Pound Sterling (GBP) has been trending lower against both the Euro (EUR) and the US Dollar (USD). The UK GfK Consumer Confidence Survey for November proved disappointing this morning, falling from 2 to 1 as domestic optimism continues to decline. Should economic growth prove weaker than anticipated the Pound is likely to see a further slump across the board, throwing more doubt on the viability of George Osborne’s latest budget.
Earlier…
Although the Pound (GBP) had been boosted strongly in the immediate wake of Chancellor George Osborne’s Autumn Statement, Thursday morning has seen Sterling on a downtrend as the initial optimism that greeted the latest budget announcements wears thin.
Pound Sterling (GBP) Exchange Rates Trending Lower on Autumn Statement Scepticism
Despite markets having been braced for the revelation of fresh harsh austerity measures in Chancellor of the Exchequer George Osborne’s Autumn Statement yesterday traders were pleasantly surprised by the seemingly more limited nature of the unveiled spending cuts. As the controversial changes to tax credits were largely scrapped the Pound (GBP) was bolstered across the board, recovering ground lost in the wake of Tuesday’s more dovish comments from Bank of England (BoE) policymakers.
However, lacking support from any fresh domestic data today, much of the initial boost in confidence to Sterling has worn off, particularly as economists pick apart the finer details of Osborne’s budget. Some scepticism has met the use of revised tax receipts from the Office for Budget Responsibility (OBR) to accommodate the softening of cuts to various departments, with concerns raised that incomes may not ultimately live up to forecast. As tomorrow’s third quarter UK GDP could also show a slowing of growth within the domestic economy, sentiment towards the Pound has taken on a more cautious note today.
US Dollar (USD) on Bullish Run after Durable Goods Orders Bettered Expectations
Ahead of today’s Thanksgiving holiday a substantial raft of US data was published on Wednesday, with results being a little more mixed than investors might have preferred. Nevertheless, the ‘Greenback’ (USD) was shored up by an unexpectedly strong October Durable Goods Orders figure which rose from -0.8% to 3.0%, suggesting that demand remains robust within the domestic economy. This stronger showing overshadowed a somewhat disappointing Personal Consumption Expenditure Core and downwardly revised University of Michigan Confidence Index.
Despite the less optimistic nature of some of the day’s data, pundits remained confident in the chances of the Federal Open Market Committee (FOMC) voting to raise interest rates before the end of the year. As such, although fresh stimulus is lacking on Thursday the US Dollar remains on bullish form against rivals.
Prospect of ECB Monetary Loosening Weighs on Euro (EUR), Volatility Predicted on German Consumer Confidence Today
The Euro (EUR) has been softened by increasing speculation over the European Central Bank’s (ECB) policy meeting next week, with traders deterred by the extent of monetary loosening measures that policymakers have allegedly been discussing. A possible expansion to the ECB’s bond buying program was not received with enthusiasm, sending the common currency into a marked slump across the board. Already weakened, the EUR/USD exchange rate was consequently pushed to a seven-month low on Wednesday afternoon by increased demand for the US Dollar.
Today’s German GfK Consumer Confidence Survey is expected to provoke further volatility for the Euro, although investors anticipate a slight dip in consumer sentiment for December as geopolitical tensions and negative global headwinds weigh on domestic confidence.
Current GBP, EUR, USD Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending lower in the region of 1.4203, while the Pound Sterling to US Dollar (GBP/USD) pairing slumped around 1.5069. Meanwhile, the Euro to US Dollar (EUR/USD) exchange rate remained on a downtrend in the range of 1.0610.
