Rising German Consumer Confidence Pushes Euro Up
The Euro is currently making small advances on Pound Sterling following a positive result from the German GfK Consumer Confidence Survey, which rose unexpectedly from 9.3 to 9.4. Pound Sterling has been able to resist sinking further thanks to the UK’s Consumer Confidence results, which also showed an unexpected 1 point rise, up to 2.
The GBP/EUR exchange rate is currently trending narrowly within the negative region.
Euro Goes Bullish As Consumer Sentiment Inches Towards Optimism
The current thin trading volume has allowed the Euro to make bullish gains against several currencies following the news that consumer confidence crept up slightly, against predictions, rising from -5.9 to -5.7.
On the back of news that Eurozone shopper sentiment is edging towards optimistic territory and with little else to provide resistance, the Euro has shot up 0.6% against Pound Sterling and the US Dollar, 0.8% against the Australian Dollar (AUD) and 1% against the Canadian Dollar (CAD).
Although British industry is concerned by George Osborne’s proposed increase to minimum wage, Pound Sterling (GBP) is performing well, advancing 0.2% against the Euro (EUR) and 0.1% against the US Dollar (USD).
GBP/EUR Exchange Rate Strong as Spanish Government Fails to Win Majority in Election
Spain’s conservative ruling party, Partido Popular (People’s Party), has suffered from a desertion of voters after failing to win a majority in yesterday’s general elections. The party, led by Prime Minister Mariano Rajoy, took less than a third of the votes, with only 7% more seats than their major opponents, the Spanish Socialist Workers’ Party (PSOE), while anti-austerity Podemos secured 21% of the vote. Over the course of the last four years Spain’s ruling party has lost nearly 4 million voters, with the number of seats held dropping from 186 at the last election to 123 yesterday.
Partido Popular has been left in a difficult position following the results of the election. In order to get the key number of 176 seats required for a majority in parliament the government will have to enter into a coalition with the PSOE. The only other alliance it could form to help it outvote the other parties would be with the Ciudadanos (Citizen) party, which was established in opposition to the Partido Popular following several allegations of corruption.
The threat of political turmoil in yet another Eurozone country and the growth in popularity of yet another anti-austerity party has seen the Euro trending down -0.1% against Pound Sterling and the US Dollar.
GBP/USD Exchange Rate Forecast: Pound Sterling Trending up Despite Business Warnings Over Minimum Wage Rise
UK businesses are warning that the government’s proposed increase to the minimum wage will harm investment and growth. George Osborne has bypassed the independent commission usually responsible for deciding the level of minimum wage to announce that the current rate of £6.70 an hour would be replaced by the national living wage rate of £7.20 per hour for workers over 25 in April 2016. Accounting for future increases, by the end of the decade the lowest paid workers in the UK will have effectively received an hourly pay rise of 40%.
The move has startled UK businesses, who claim they will struggle to accommodate the increases. According to a survey of service firms by the Confederation of British Industry (CBI), more than half of firms will raise prices in response to higher wage costs, while over a quarter will cut back on staff in April, when the new rate of pay takes effect.
Carolyn Fairbairn, CBI director general, warns: ‘The government must be careful not to sacrifice prosperity for political expediency by saddling businesses with costs that could harm investment, which is critical to increasing productivity.’
Despite concerns among UK businesses, the GBP/USD exchange rate is trending up, with the US Dollar partly weakened by presidential candidate Donald Trump’s claims that the US is in an economic bubble. Appearing at a Republican rally in Cedar Rapids, Iowa, on Saturday, Mr Trump told supporters: ‘Remember the word bubble? You heard it here first. I don’t want to sound rude, but I hope if it explodes, it’s going to be now, rather than two months into another administration.’
Pound Sterling to Euro, US Dollar: GBP/EUR, GBP/USD Exchange Rate Forecasts
Little data is available as the markets begin to slow ahead of the Christmas break, with only CBI Reported Sales due today for the UK and the Eurozone Consumer Confidence index. US data today is equally limited, although Wednesday sees a glut of data, including important figures for Durable Goods Orders and Personal Consumption Expenditure Core.
The GBP/EUR exchange rate is currently trending in the region of 1.3726, while the EUR/GBP exchange rate is trading around 0.7285.
The GBP/USD exchange rate is currently trading in the region of 1.4905, with the USD/GBP exchange rate trending around 0.6708.