Euro Trends Down After Disappointing French GDP
Economic growth in France has slowed in the third quarter of the year, dropping from 1.2% to 1.1% Year-on-Year (YoY). With no more data due for the Eurozone before Christmas, the Euro is likely to be pushed lower over the next few days if UK and US data prints positively.
US Dollar Advances on Sterling After Better-than-Expected Data
US Gross Domestic Product, Personal Consumption and Core Personal Consumption Expenditure figures have all performed better than forecast. While three-quarter annualised GDP fell slightly to 2.0%, it remained above the forecast level of 1.9%, while Core Personal Consumption rose to 1.4%.
As a result of the positive data the US Dollar has been able to push Pound Sterling further into negative territory, extending leads of 0.2%.
Although the UK Consumer Confidence Survey showed that consumer sentiment towards the economy was growing more positive, Public Sector Net Borrowing has increased by more than expected. Despite this, Pound Sterling has remained narrowly in positive territory against the US Dollar, although it is sliding against the Euro.
GBP/EUR Exchange Rate Forecast: Public Sector Spending Deficit Widens Further
While government borrowing was predicted to have increased this month, the deficit in public finances has widened further than expected. Public Sector Net Borrowing has increased from £6.7 billion to £13.6 billion, £2.5 billion higher than originally forecast. While George Osborne has managed to cut public sector net borrowing by -8.9% over the first two thirds of the year, November’s borrowing figures represent a 10.1% increase on the same period a year ago. With the current deficit already at £66.9 billion, the Chancellor will be unlikely to avoid overshooting his intended £68.9 billion target for the financial year.
The result has seen Pound Sterling slide in negative territory against the majority of currencies, slipping -0.2% against the Euro, -0.5% against the Australian Dollar and -0.6% against the New Zealand Dollar.
Meanwhile, the Euro has been buoyed by rising German consumer confidence, with the survey results pushing the index up marginally from 9.3 to 9.4. So far the common currency has managed to shrug off any negative effects from the political turmoil following the Spanish elections.
GBP/USD Exchange Rate Forecast: US Dollar Weakness Allows Pound Sterling to Remain in Positive Territory
Both Pound Sterling and the US Dollar are soft today, with the GBP/USD exchange rate managing to hold opening levels despite the negative UK borrowing figures. ‘Cable’ has also managed to avoid the weakening effects of rising fears regarding an unstable UK recovery, with new figures showing that British families are on track to borrow a total of £40 billion this year. Families had been frugal during the period immediately following the financial crash, running up a surplus of £70 billion as Britons saved their money rather than spending it.
The news has fuelled concerns that the UK’s economic recovery and growth is based upon unsustainable levels of debt. Shadow Chief Secretary to the Treasury Seema Malhotra has warned: ‘George Osborne is relying on millions of British families going further into debt to hit his growth targets. This is risky behaviour from a Chancellor whose policy decisions are hurting not helping British families. Alarm bells should be ringing.’
The US Dollar is still weak following the worse-than-expected result from the National Activity Index, which shrank from -0.17 to -0.30 in November, rather than rising into positive territory as forecast.
Pound Sterling to Euro, US Dollar: GBP/EUR, GBP/USD Exchange Rate Forecast
UK and Eurozone data is relatively thin in the run up to Christmas, while the US will release several key figures over the coming days, including Durable Goods Orders. The only relevant data due out for the rest of the day is for the US, including GDP, Personal Consumption and Existing Home Sales, which is likely to provide the impetus needed for the US Dollar to push Pound Sterling further below technical support.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending around 1.3617, with the Euro to Pound Sterling (EUR/GBP) exchange rate in the region of 0.7343.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trading in the region of 1.4889, while the US Dollar to Pound Sterling (USD/GBP) exchange rate is trending around 0.6716.