The Pound to Euro (GBP/EUR), Pound to New Zealand Dollar (GBP/NZD) and Pound to Australian Dollar (GBP/AUD) exchange rates were trending higher in Friday’s European session despite a drop in Consumer Confidence, according to YouGov and the Centre for Economics and Business Research (CEBR).
According to the latest statistics, UK consumers are at their gloomiest since the period directly after the Brexit referendum last year. An accumulation of negativity over household finances, property prices, job security and business activity has created a drop in the index, coming in at 106.6 this month, down from 109.3 last month.
CEBR Economist Christian Jaccarini commented:
‘The first interest rate hike in over a decade triggered fears that higher borrowing costs will compound the inflation-induced squeeze on household incomes. Simultaneously, higher rates and a housing market in slowdown are warning signals for many homeowners, who fear house price growth may be further dampened. With these economic headwinds set to persist, and the OBR [Office for Budget Reposibility) forecasting a weaker growth, households are understandably worried.’
If these forecasts are correct, retail sales around Christmas could be blow to businesses, especially as some are putting a lot of expectation into today’s Black Friday sales.
Meanwhile, newspapers are suggesting Briton’s could feel a pay squeeze lasting a few decades. The Institute for Fiscal Studies believes that the in 2022-23, Briton’s will be earning around £750 less per year (in real terms adjusted for inflation), than 2007-2008.
UK Mortgage Approvals have also hit a 13-month low with lenders approving 40,488 loans in October following September’s 41,576.
Meanwhile, the Euro hit a six-week high against the US Dollar (EUR/USD) as investor sentiment rose on the strength of the currency bloc’s economy and positive economic data. The week began badly for the Euro exchange rate when German coalition talks collapsed, but the growth outlook for the Eurozone has sparked a rebound.
Analyst Lee Hardman commented:
‘While there is still a risk that ongoing political developments could potentially trigger another knee jerk Euro sell-off in the coming weeks or months, any bouts of Euro weakness should remain both temporary and limited.’
The New Zealand Dollar exchange rate has experienced some weakness on weak trade balance data. The October figure showed a deficit of -NZ$871 million.
The Pound to Australian Dollar (GBP/AUD) exchange rate is trending at 1.7495. The Pound to New Zealand Dollar (GBP/NZD) is trending at 1.9376. The Pound to Euro (GBP/EUR) exchange rate is residing in a tight range at levels of 1.1224.