US Consumer Confidence falls from seven year high to lowest level since June

Claire Hogarth26/Nov/2014Currency Updates

GBP

Sterling strengthened again on Tuesday to hit its best position in a week versus the greenback, rising by 0.2%, although the Pound ended the day 0.1% down on the Euro.

The main event in the UK yesterday took place at the House of Commons where Mark Carney, along with three other MPC members, gave an inflation testimony to UK lawmakers. The Bank of England officials played down the risk of deflation but highlighted the external risks emanating from Europe and Japan. While inflation remained 0.7% below target in October, Carney maintained his expectations that the next move in policy would be to increase rates, with the committee not discussing the need for further stimulus.

Meanwhile, it was announced that the number of mortgages granted by UK banks has fallen by 16% over the past year. The BBA report showed mortgage approvals fell to 37.1K in October, giving further indication that the UK housing market has gone off the boil this year. Today’s announcements will be headlined by the release of the GDP figures for Q3 at 9:30am, with economists forecasting the economy to have grown by 3%.

EUR

The Euro rose sharply on the Dollar during afternoon trading, enabling the currency to finish 0.3% up on greenback.

Higher levels of household and consumer spending enabled Germany to narrowly avoid a recession in the third quarter, with Europe’s largest economy expanding by 0.1% in the three months from July to September. Increased exports provided a boost, enabling GDP to grow by 1.2% YoY in Q3 as expected. Meanwhile, the Eurozone may be stuck in a “persistent stagnation trap” according to an OECD report yesterday that urged the ECB to embark on more monetary stimulus, including the purchase of asset-backed securities.

A relatively quiet day in the Eurozone today with only a few second tier releases, most notably consumer confidence data for France and Italy in early morning trading.

USD

The greenback unexpectedly slumped by 0.3% against its major counterparts on Tuesday afternoon as a result of below forecast consumer confidence.

Confidence that individuals have in the US economy fell to a five month low according to the Conference Board. The index plummeted from October’s seven year high of 94.1, to 88.7 this month. Earlier in trading, however, it was announced that an increase in consumer spending from 1.8% to 2.2% in the US contributed to GDP growth being revised upwards in the third quarter of the year. The world’s largest economy grew 3.9% in Q3, 0.4% more than was expected, in another clear sign that the US economy is strengthening despite the drop in confidence. The growth figure marked the strongest consecutive quarters of growth in the country since 2003.

Wednesday is set to be a very busy day in the US, with a long list of announcements and releases likely to cause a great deal of market movement. Traders will, however, be focusing on Durable Goods Orders for October and the four-week average jobless claims data at 1.30pm GMT.

Rest of the world

The Australian Dollar fell by as much as 0.9% against greenback yesterday after RBA Deputy Governor Philip Lowe said the exchange rate was too high, voicing concerns on the overall effect this has had on wages. Traders reacted to the comments, causing the currency to hit a four year low, having now declined by more than 8% in the past three months.

Elsewhere, the Nigerian central bank raised its benchmark interest rate for the first time in three years, devaluing the Naira after tumbling oil prices had caused the currency to hit an all-time low. The rate was bumped up by 100 basis points to a record high of 13%, causing the currency to lose 2% of its value against the Dollar.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.