This GBP report looks at the impact of business investment sentimnent in the UK, along with credit card spending for June and some key factors that could affect Sterling exchange rates this week. The table here shows the market movements for a number of GBP currency pair in the last month:
|Currency Pair||% Change||Difference on £200,000|
The Pound took yet another tumble yesterday following reports that major businesses have halted their investment plans in the UK and that consumer spending on credit cards had been cut dramatically.
Deloitte, the accountancy firm, surveyed Chief Financial Officers in large British companies and found that business optimism among these companies had fallen sharply in the second quarter of 2017, which was made worse by the outcome of the UK snap election last month. The survey showed that 72% of those questioned thought that business conditions in the UK would be worse after the UK’s divorce from the EU, which was the largest percentage since Deloitte began asking the question over a year ago.
This leads us to the question, how will this affect the chances of the Bank of England raising interest rates in the near future?
It was only last week that Michael Saunders, one of the members of the Monetary Policy Committee (MPC), said that he was confident that if exports and investments continued to improve, this would help to offset the slowdown in consumer spending, pointing towards the possibility of a rate hike in the near future.
This morning two more of the MPC members Haldane and Broadbent will be speaking at 10 and 11am, and taking into account the latest run of disappointing data, any signs of a more negative tone could cause GBP to weaken further.
Credit Card company Visa have also reported that spending on cards fell in June, providing them with their weakest quarter in four years. Consumer spending is lower across the board as confidence has been quashed, inflation is rising and wage growth continues to remain stagnant.
Average earnings figures released tomorrow at 9:30am will give a clearer idea of exactly how wage growth has been affected in May, and anything less than the 1.8% predicted could result in further Sterling weakness.
Tomorrow will also provide an insight into the latest Unemployment rate for the UK, released at the same time. This has been declining steadily since mid-2013, however in the current economic climate it is not out of the question for unemployment levels to buck the trend. The consensus is for rates to remain at 4.6% however anything higher than this, and GBP/EUR rates could fall further, potentially into the 1.11’s.
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