Pound Exchange Rate Climbs (GBP/EUR, GBP/CHF, GBP/AUD) Despite Disappointing UK Data

Pound Exchange Rate Climbs (GBP/EUR, GBP/CHF, GBP/AUD) Despite Disappointing UK Data

The Pound managed to register gains against the Euro (GBP/EUR), Swiss Franc (GBP/CHF), and Australian Dollar (GBP/AUD) as a raft of disappointing economic data made its way onto the market.

In Australia, investors weren’t inspired by Australia’s sizeable trade balance reading for November. Despite several months of trade surplusses, the November figure came in at -$628 million, while October’s figure was negatively revised to -$302 million.

Economist Katie Hickie said:

‘Even if the trade balance did recover in December, the weak start to the quarter means that net trade probably made a negative contribution to GDP growth in the fourth quarter of last year following a neutral contribution in the third quarter.’

Meanwhile, in the Eurozone, the latest Consumer Price Index reading has fallen further away from the European Central Bank’s (ECB) 2.0% target, from 1.5% to 1.4% on the year in December. The fall comes despite improving momentum in the currency bloc and some healthy growth stats.

Gizem Kara of BNP Paribas stated:

‘Although underlying inflation remains low by historical standards, we remain confident that core inflation will re-establish an upward trend in 2018 and end the year at about 1.6 percent year over year. The rapid absorption of economic slack, higher wage growth, improved inflation expectations and favourable external factors all signal in that direction.’

In the UK the latest British Retail Consortium (BRC) shop price index showed a decline in prices due to discounts offered on non-food items. The annual figure contracted by -0.6% in December, following November’s -0.1%.

BRC Chief Executive Helen Dickson said:

‘Food inflation picked up pace this month, fuelled by climbing global food prices earlier in the year. While retailers will continue to do their best to absorb increases for their customers, the challenges to the industry remain stark with more inflationary pressures in the pipeline.’

UK car registrations also took a tumble in December, falling by -14.4% on the year. The British car industry has begun demanding clarity from the government regarding Brexit as confidence takes a hit. Today’s fall in car sales is the most significant since 2009.

Industry expert Chris Bosworth said:

‘Today’s figures reflect the impact that anti-diesel messages from the government and ongoing Brexit trade negotiations are having on both business and consumer confidence across the motor industry.December marks the ninth month of consecutive decrease in new car sales as squeezed consumers are reluctant to purchase big-ticket items such as cars and motorcycles.’

Meanwhile, the Swiss Franc and Japanese Yen have been the weakest-performing currency majors this week as global risk appetite picks up.

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