Pound slides amid grim UK economic outlook

The pound trended lower again on Tuesday as the currency was buffeted by the UK’s increasingly bleak economic outlook.

Sterling appears to be holding its ground so far this morning, with GBP/EUR stable at €1.1498 and GBP/USD flat at $1.2147. GBP/CAD is rangebound at CA$1.6424, while GBP/AUD and GBP/NZD tick up to AU$1.9045 and NZ$2.0480, respectively.

Coming up, will another contraction in US durable goods orders pull the US dollar lower this afternoon?

What’s been happening?

The pound stumbled during yesterday’s European session, amid growing concern over the UK’s economic trajectory.

Sterling’s losses followed a report from credit rating agency S&P Global Ratings which warned the UK economy is ‘at risk of stagnation’ and that growth will continue to underwhelm well into 2024.

Also sapping GBP sentiment was a poll by Reuters which showed that the majority of economists see the Bank of England (BoE) as having delivered the final interest rate hike of its current cycle.

The euro, meanwhile, trended higher on Tuesday, with the appeal of the safe-haven currency being bolstered by a souring market mood.

The US dollar initially benefitted from these risk-off flows but was unable to sustain these gains through to the end of the European session, with the currency facing resistance amid some apparent profit-taking.

What’s coming up?

Kicking off today’s session was the publication of Germany’s latest consumer confidence data.

October’s index reported another deterioration of morale, with household sentiment in the Eurozone’s largest economy now at its worst levels since April, exerting pressure on the euro this morning.

Coming up later today is the publication of the latest US durable goods orders data. Economists forecast goods orders will have contracted again last month, albeit at a much slower pace than in July. Will this pull the US dollar lower this afternoon?

Meanwhile, with GBP data still thin on the ground, the pound may struggle to attract support, particularly if the UK’s recent economic gloom continues to permeate markets.