While the GfK consumer confidence ended the year with another decline the Pound Euro exchange rate remained on a narrow uptrend.
As forecasts had pointed towards the measure holding steady at -12 on the month the drop to -13 was still a negative surprise.
All in all, signs continue to indicate that consumers are reining in their spending as a result of the ongoing wage squeeze and persistent uncertainty on the subject of Brexit.
Commenting on the data, Joe Staton of GFK noted:
‘We need to see several issues move on before the downward trend of the consumer mood changes. We need to have a better sense of how Brexit will pan out, and also of how quickly and how far interest rates will rise. But none of this will be resolved quickly so there’s every likelihood that 2018 will take us lower.’
Even so, a smaller-than-expected uptick in the UK private sector net borrowing figure for November helped to shore up demand for the Pound this morning.
As new government debt had not risen as far as anticipated in the last month this encouraged investors, in spite of increasing pressures on the Treasury.
However, given the lack of clarity over the likely shape of the UK’s future trading relationship with the EU the upside potential of GBP exchange rates remains limited.
If the finalised third quarter UK gross domestic product data shows no change, though, this should limit any GBP EUR exchange rate weakness in the short term.
Euro Exchange Rates Weaken with Catalan Election Jitters
Catalonia returned to the polls in a bid to resolve the political impasse that followed the earlier controversial independence referendum, leaving the Euro under some pressure.
Markets are not hopeful that the vote will yield any real solution to the long-running crisis, with pundits indicating that the final result is likely to be tight.
While this is unlikely to result in any significant flare up in regional tensions the election has still stirred up a lingering sense of uncertainty.
However, if the Eurozone consumer confidence reading for December shows an improvement this could shore up the single currency this afternoon.
Focus will also fall on Friday’s German GfK consumer confidence index, which investors looking for fresh signs of optimism within the Eurozone’s powerhouse economy.
Any improvement in sentiment is likely to overshadow this latest bout of jitters over Catalonia, denting the GBP EUR exchange rate.
On the other hand, signs that confidence is faltering at the end of the year may keep the Euro on a softer footing.
Current GBP EUR Interbank Exchange Rates
At the time of writing, the Pound Euro exchange rate was trending narrowly around 1.1263. Meanwhile, the Euro Pound exchange rate was slumped in the region of 0.8876.