As ‘Brexit’ fears hamper the strength of Pound Sterling (GBP) the currency has been weakened further today by weaker fourth quarter UK GDP, continuing to slump against the Euro (EUR) and US Dollar (USD).
UK GDP Weakens to Push Pound Sterling (GBP) Exchange Rate Lower
While yesterday’s BBA Loans for House Purchase figure showed a larger increase in lending than forecast, rising from 43,660 to 47,509, this failed to particularly improve the outlook of Pound Sterling (GBP). Investors were not overly impressed by this latest sign of resilience within the UK economy as ‘Brexit’ concerns continued to overshadow the appeal of the currency. Justice Secretary Michael Gove called into question the legally binding nature of the reforms agreed at last week’s European leaders summit, prompting a fresh round of heated debate over the issue.
Although pundits had anticipated that the UK’s fourth quarter GDP would be revised downwards today the quarterly figure held steady at 0.5%, seeming to confirm the stronger performance of the domestic economy. However, this was accompanied by a disappointing year-on-year figure as growth was reported at 1.9% rather than the more bullish 2.1% previously estimated. As a result the Pound has given up some of its earlier gains, retuning to a downtrend against many of the majors.
Stronger German Consumer Confidence Shores up Euro (EUR) Exchange Rate Today
Despite strengthening against the Pound, the single currency (EUR) remained in relatively muted spirits on Wednesday as fresh economic data from the Eurozone was generally lacking. Confidence in the currency union was dented by comments from International Monetary Fund (IMF) Managing Director Christine Lagarde, who suggested that the rest of Europe is likely to experience negative economic consequences in the event of a ‘Brexit’.
The March German GfK Consumer Confidence Survey came in stronger than expected this morning, printing at 9.5 rather than 9.3 as consumers begin to shake off some of the malaise of the start of the year. As a result the Euro has trended higher against rivals, particularly as investors are expecting to see an upwardly revised Eurozone Consumer Price Index later today.
USD/GBP Exchange Rate Retreats from Seven-Year High after Disappointing US Data
Renewed stock market turbulence has helped to bolster the appeal of the US Dollar (USD), in spite of fresh signs that the world’s largest economy is slowing. Defying expectations of a modest uptick the February Services PMI slumped sharply from 53.2 to 49.8, indicating that the sector fell into contraction territory in the last month.
With New Homes Sales also contracting markedly on the month in January the outlook of the domestic economy appears a lot less optimistic. This would suggest that the Federal Open Market Committee (FOMC) will opt to leave off on further monetary tightening for the time being, a prospect that dented the bullish run of the ‘Greenback’. Consequently the US Dollar to Pound Sterling (USD/GBP) exchange rate has retreated from its earlier seven-year best of 0.7204.
Current GBP, EUR, USD Exchange Rates
At the time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending narrowly at 1.2642, while the Pound Sterling to US Dollar (GBP/USD) pairing was slumped in the region of 1.3920. Meanwhile, the Euro to US Dollar (EUR/USD) exchange rate was on a downtrend around 1.1010.