British Pound to Euro (GBP/EUR) and US Dollar (GBP/USD) Exchange Rates Lower after CBI Sales
The British Pound (GBP) exchange rate began trading on the back foot against the Euro (EUR) and US Dollar (USD) on Wednesday as the repercussions of Tuesday’s interest rate comments continued to weigh on Sterling’s appeal.
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Yesterday Bank of England Governor Mark Carney shocked investors by almost reversing his stance on interest rates occurring later this year.
While citing greater-than-forecast slack in the UK economy, Carney intimated that policy makers would be very cautious and monitor economic reports very closely before sanctioning any action.
His comments were considerably more dovish than those made earlier this month.
Carney’s original intimation (that a rate increase could take place far sooner than markets currently expect) had pushed the Pound to a five-year high against the US Dollar and a 20-month high against the Euro.
Sterling has now come off those levels and it seems unlikely that the Pound will be able to reassert itself without the aid of surprisingly upbeat reports from the UK.
Those seem to be in short supply however and the appeal of the Pound (GBP) in comparison with the Euro (EUR) and US Dollar (USD) was also dimmed by the difference in recent fundamentals from the UK, Eurozone and US.
Although yesterday’s German business confidence measures failed to impress (coming in below expected levels) today’s German GfK Consumer Confidence report showed that sentiment among consumers rise to almost record levels in July.
The index pushed from an upwardly revised 8.6 to 8.9 (close to the survey’s record high of 9.1) as the public responded to the European Central Bank’s new policy stance.
Similarly, the US Dollar was bolstered as Markit Manufacturing PMI, US Consumer Confidence and New Home Sales reports all smashed expectations.
Meanwhile, the few UK data releases that have taken place this week have done little to bolster the Pound.
Today’s Confederation of British Industry Reported Sales figure, for example, came in well below expected levels.
Economists had expected the index to rise from +16 to +23 but it actually plummeted to +4 – the lowest level for over six months.
In the opinion of CBI official Barry Williams; ‘a fall in clothing and food sales have contributed to a disappointing month. Slow wage growth continues to weigh on how much consumers are willing to go out and spend.’
Stagnant wage growth was one of the main concerns voiced by BoE Governor Mark Carney yesterday.
The British Pound is currently trading against the Euro in the region of 1.2472 and trading against the US Dollar in the region of 1.6972.