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Pound extends gains despite dip in confidence

By Philip McHugh on November 30, 2017

UK confidence falls, but Sterling proves resilient
Eurozone inflation tipped to rise
GBP/AUD at one-year high

Pound rallies across the board

Speculation that the UK is on the cusp of making significant progress in Brexit negotiations left Sterling stronger against the majors on Wednesday, and the British currency managed to extend gains despite falling consumer confidence.

The GfK consumer confidence index fell from -10 to -12 in November, a dip to -11 had been forecast.

According to Joe Staton, Head of Market Dynamics at GfK: ‘Sadly, there’s no festive cheer in this month’s Consumer Confidence Index. This is the second time this year that consumer confidence has matched the worrying -12 score seen in July 2016 after the Brexit vote. This is also the 20th consecutive month where the Overall Index score has come in at a negative value – that’s not good festive news.’

Sterling shrugged off the impact of sliding sentiment, however, rising around 0.3% against the euro, US dollar and Australian dollar and surging over 1% against the New Zealand dollar.

EUR/GBP down as German retail sales fall, inflation ahead

The euro edged lower against the pound on Thursday as German retail sales showed an unexpected decline in October.

Sales slid -1.2% on the month and -1.4% on the year, seriously missing forecasts of 0.3% and 2.8%.

However, the common currency held firm against the US dollar and could climb later today if the Eurozone’s unemployment and inflation figures impress.

The region’s unemployment rate is forecast to hold at 8.9% while the consumer price index is believed to have risen from 1.4% to 1.6% on the year. Core inflation is also predicted to edge to 1% from 0.9%.

As the European Central Bank (ECB) has repeatedly cited weak inflation as a reason for keeping monetary policy accommodative, the euro may be bolstered if the report shows consumer price pressures moving closer to the central bank’s 2% target.

GBP/AUD at 1-year high, GBP/NZD jumps 1%

The pound is managing to hold a one-year high against the Australian dollar this morning despite positive news from Australia (and one of its largest trading partners) as hawkish comments from the Fed depleted demand for higher-risk currencies.

Australian building approvals jumped 0.9% on the month in October rather than sliding -1.0%, while China’s manufacturing PMI accelerated from 51.6 to 51.8. The nation’s services PMI also improved from 54.3 to 54.8.
The New Zealand dollar, meanwhile, tumbled across the board following the release of New Zealand’s activity outlook and business confidence reports.

The activity outlook gauge slid from 22.2 to 6.5 and business confidence plummeted from -10.1 to -39.3.

Upcoming Data
Thursday, 30 November, 2017

00:00            NZD Activity Outlook (NOV)
01:00             GBP GfK Consumer Activity Outlook (NOV)
10:00             EUR Eurozone Unemployment Rate (OCT)
13:30             EUR Eurozone Consumer Price Index (NOV)
22:30             AUD AiG Performance of Manufacturing Index

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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