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Rising UK consumer credit to shore up pound

business-articlesRising UK consumer credit to shore up pound
  • Pound to benefit from higher consumer borrowing

  • Euro vulnerable to disappointing German inflation data

  • Mixed US data weighs on US dollar outlook


Increased consumer borrowing to boost pound demand

Pound exchange rates could find further support this morning on the back of October’s net consumer credit and mortgage approvals data.
Any signs of increased borrowing among domestic households should encourage investors to back the pound, pointing towards elevated levels of consumer spending.
However, as the Bank of England (BoE) has previously expressed concerns over high levels of household borrowing a higher net consumer credit reading could diminish the odds of tighter monetary policy.
Speculation over Brexit is also likely to provoke volatility for GBP exchange rates today in the wake of the Bank of England’s dire assessment yesterday.

Weaker German inflation to drag on euro

The euro is likely to come under increased pressure with the release of November’s German consumer price index.
As forecasts point towards an easing in the annual inflation rate from 2.5% to 2.4% this could give the European Central Bank (ECB) greater incentive to leave interest rates on hold.
Unless inflation shows a sustained strengthening the ECB looks set to maintain a more neutral policy outlook in the months ahead.
On the other hand, a better-than-expected CPI reading could see demand for the single currency pick up once again.

US dollar looks for support on US inflation indicator

After yesterday’s mixed bag of US data investors are hoping to see a more encouraging showing from October’s personal consumption expenditure core.
A fresh uptick in inflationary pressure on the year could give USD exchange rates a boost this afternoon.
Rising inflation may encourage the Federal Reserve to maintain a more aggressive pace of monetary tightening in 2019, to the benefit of the US dollar.
If markets see reason to bet on the Fed adopting a more gradual approach to interest rates in the coming months, though, USD exchange rates may come under increased pressure.

Upcoming Data:

Thursday, 29th November 2018
09:30 GBP Net Consumer Credit
09:30 GBP Mortgage Approvals
13:00 EUR German Consumer Price Index
13:30 USD Personal Consumption Expenditure Core

Philip McHugh

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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