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The pound is at a six-month low against the US dollar
The pound fell to its lowest rate since March yesterday against the US dollar as the greenback continued to find demand on Wall Street. However, the sterling-to-dollar rate is currently 12.8% higher than it was a year ago.
The pound’s tumble could be down to the UK’s bleak economic outlook as central bankers are expected to keep interest rates higher for longer.
The US dollar also made marginal gains against the euro yesterday despite US consumer confidence data for September coming in at 103, lower than forecasts of 105.5 and August’s 108.7 reading.
New home sales of single-family houses in the US decreased by 8.7% in August 2023 to a seasonally adjusted annualised rate of 675,000, the most in 11 months.
On a different note, the S&P CoreLogic Case-Shiller 20-city US house price index edged up 0.1% year-on-year in July. This represents the first increase in five months but outperformed forecasts of a 0.3% fall as home supply remains limited.
The possibility of the US government’s market shutdown loomed over global markets yesterday as credit rating agency, Moody’s, warned it would harm the country’s credit. There are a few days left for Capitol Hill to avert a shutdown by passing a spending bill by October 1.
In the news, banks including some of Europe’s biggest lenders have helped fossil fuels companies raise more than one trillion euros from the global bond markets since the Paris climate agreement in 2016. These findings have raised concerns among sustainable investment campaigners.
Fashion retailer Asos reported profit cuts in its July and August forecasts as poor weather contributed to weaker online demand. These cuts resulted in a £60 million hit to cash flow.
This morning, the GfK Group’s climate indicator for Germany dropped to -26.5 heading in October as persistently high inflation continues to weigh on consumer sentiment.
European data is light for the rest of the day; however, US economists will be watching out for durable goods orders data, due at 1:30 pm (UK time).
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GBP: Weakness lowers the pound’s forecasts
Goldman Sachs lowered the pound-to-euro and pound-to-dollar forecasts this week as “a combination of weaker growth, high inflation, and lower real rates is a negative mix for the currency.” The current three-month forecasts of 1.0990 (EUR) and 1.18 (USD) are at levels more typically associated with times of UK crises of confidence.
GBP/USD: the past year
EUR: Seeking guidance on ECB sentiment
This morning the European Central Bank’s non-monetary policy meeting will be held ahead of the central bank’s general council meeting tomorrow. After that, several policymakers including McCaul and Enria are due to speak out on the Bank’s economic sentiment.
USD: Durable goods orders expected
Early this afternoon, the data for US durable goods orders will be released. Markets expect orders to decline 1.4% in August from a 5.2% decrease just a month before. July’s result marked the sharpest decline since April 2020.
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