Pound Rises as Theresa Heads to Brussels
UK consumer confidence fell sharply in November as UK shoppers were reluctant to spend money because of the sluggish wage growth and inflation’s impact on household incomes. The survey by YouGov and the Centre for Economics and Business Research (CEBR) revealed that the interest rate hike also affected consumers behaviour. Mortgage approvals during October hit the lowest level since September 2016.
Theresa May is heading to Brussels to meet with the European Council President, Donald Tusk, in order to put the Brexit negotiations back on the right track since in the last weeks they seem to have stalled. Jean-Claude Juncker told reporters that there has been progress in talks, but repeated that he will only know if it has been sufficient after meeting the British prime minister on 4th December. In the US, President Trump used his Thanksgiving speech delivered to troops overseas to promote his administration’s achievements over the past year.
Pound Sterling – UK Markets
Today, the Pound soared against the US Dollar with the exchange rate set at $1.33. Sterling lost ground against the Euro with the exchange rate set at $1.12. The week that included inflation and GDP data releases plus the Autumn Budget announcement, ends with Theresa May travelling to Brussels to discuss Brexit with the EC President Donald Tusk.
A survey by YouGov and CEBR showed that, during November, the UK consumers’ confidence dropped to a post-Brexit referendum low. The index fell from 109.3 in October to 106.6 in November, with that being the first recorded drop since June this year. CEBR economists said that consumers got more reluctant when the Bank of England (BoE) raised interest rates for the first time over the last decade. Shoppers are afraid to spend money because, as the head of YouGov, Stephen Harmston, said “the increased cost of living has put a big squeeze on people’s household finances.”
A report by the British Bankers’ Association (BBA) revealed that mortgage approvals in October hit a 13-month low. Remortgages hit a 9-year high since many British home owners decided to evade the costs coming from the BoE’s interest rate hike. The newest policymaker in the BoE’s board, Silvana Tenrehro, said in an interview with Bloomberg that future interest rates moves will be associated with the implications of Brexit on British economy. Tenrehro noted that it will all depend on how households and companies react to the new economic conditions and that the central back will respond accordingly.
US Dollar – US Markets
The US Dollar dipped against the Euro, hitting a one and a half-month low, with the exchange rate set at €0.84. The US Dollar Index (DXY), which measures the value of the Dollar against six major currencies, came in at 93.18. The US markets will reopen today after the Thanksgiving holiday.
President Donald Trump managed to attract the world’s attention when he took the opportunity of his Thanksgiving speech to promote his achievements since he was elected. Trump addressed, from Florida, the US troops overseas, saying that “we are doing well at home, the economy is doing great,” and added that soldiers will enjoy the benefits of “big, beautiful fat tax cuts.” The President attacked on the previous administration, without mentioning Barack Obama’s name, by noting that the army was not let to win wars in the past.
An Adobe Analytics report showed that Americans spent more than $1.52bn online on Thanksgiving. Consumer spending rose 16.8% when compared to the previous year. The report tracked 80% of online transactions at the top 100 US retailers. Lines outside brick and mortar stores thinned as consumers preferred to do their shopping online. 46% of the traffic on retail websites came from people using their cell phones to do their shopping research.
Euro – European Markets
The Euro surged to the US Dollar, hitting a six-week high, with the exchange rate set at $1.18. The single market currency gained value on the back of positive data coming from Germany and the strength of the Eurozone’s recovery.
CESIfo Group published a survey regarding German business climate and expectations in November. Business climate unexpectedly improved in the last month of autumn, coming in at 117.5 points, surpassing expectations for a 116.6 reading. German businessmen were a bit more pessimistic in November about the current economy assessment than in October. However, the survey showed that they were more optimistic about the future as the expectations for the next six months’ index rose to 111.0, beating expectations for a 108.9 figure.
In Italy, industrial orders fell in September by 3.9%, on a monthly basis, which was a drastic shift from August’s 5.3% rise. Industrial sales also declined in the first month of autumn by 1.2%, on a month-to-month basis, showing that Italians were keener on spending in shopping in August when retail sales had increased by 2%. In Germany, the Green Party called Merkel to forge a coalition government with SPD (Social Democrats).
Other Currencies – Highlights
Sterling gained ground against the Australian Dollar, trading at 1.75 AUD. Amazon is launching its Australian retail operations today. Westpac analysts suggest that “the launch will add to already significant pressure on profitability and margins.” However, they also believe that Australian retailers will have to invest in enhancing online sales channels and make the necessary changes in their logistics departments.
The Pound edged up against the New Zealand Dollar, trading at 1.93 NZD. According to data published by Statistics New Zealand, the trade deficit in October was larger than expected. The reason for the unexpected rise was a one-off import, which ANZ analysts suspect that it was aircrafts costing NZ$257m. In their report, ANZ economists suggest that, taking that sum of money aside, the trade picture looks reasonable.
Sterling moved higher against the Swiss Franc, trading at 1.30 CHF. The Swiss industrial production rose by 5.5% in the third quarter of the year, on an annualized basis.