ExchangeRates.org.uk - Weaker-than-expected business confidence data triggered sharp losses for the Pound and the Euro amid further dollar strength, although overall volatility spiked higher and the US currency failed to hold its best levels.The Euro overall remained under notable pressure in global markets.
The Pound to Dollar (GBP/USD) exchange rate dipped sharply to 6-month lows just below 1.2500 before a recovery to 1.2530.
According to Scotiabank (TSX:BNS); “Risks are tilted towards a fuller retracement of the Apr/Sep rally from 1.23.”
The Pound to Euro (GBP/EUR) exchange rate spiked to test 10-day highs at 1.2100 and close to 31-month highs before a retreat to 1.2040.
ING commented; “we continue to see rather downside risks in EUR/GBP beyond the 0.8300 mark soon.
(GBP/EUR above 1.2050).
UK retail sales volumes dipped 0.7% for October after a downwardly-revised 0.1% increase for September and compared with consensus forecasts of a smaller 0.3% monthly decline.
On a 3-month view, sales increased 0.8% compared with the three months to July while the year-on-year increase slowed to 2.4% from 3.2% previously.
ONS senior statistician Hannah Finselbach commented; “Retail sales fell back in October following three months of growth.
The fall was driven by a notably poor month for clothing stores, but retailers across the board reported consumers held back on spending ahead of the Budget.”
The GfK consumer confidence index, however, improved to -18 for November from -21 previously and compared with consensus forecasts of a slight net decline to -22.
Neil Bellamy, consumer insights director at GfK, commented "while 2025 is just around the corner and the new year often brings optimism, it’s too early to expect significant further improvements in the consumer mood.”
The UK PMI manufacturing index dipped to a 9-month low of 48.6 for November from 49.9 previously and compared with consensus forecasts of 50.0.
The services-sector index also retreated to a 13-month low of 50.0 from 52.0 and below expectations of 52.0.
There was strong upward pressure on input costs, although output charges increased at the slowest rate for three years.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence commented; “The first survey on the health of the economy after the Budget makes for gloomy reading.
Businesses have reported falling output for the first time in just over a year while employment has now been cut for two consecutive months.”
Euro-Zone data was notably worse than expected.
The latest French PMI business confidence data was extremely weak, and the German services-sector index also dipped back into contraction territory.
The Euro-Zone manufacturing index retreated to 45.2 for November from 46.0 previously and compared with consensus forecasts of no change.
The services-sector index also dipped sharply to 49.2 from 51.6 and compared with expectations of 51.5.
According to Dr.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank; “Things could hardly have turned out much worse.
The eurozone's manufacturing sector is sinking deeper into recession, and now the services sector is starting to struggle after two months of marginal growth.”
He added; “It is no surprise really, given the political mess in the biggest eurozone economies lately – France's government is on shaky ground, and Germany's heading for early elections.
Throw in the election of Donald Trump as US president, and it is no wonder the economy is facing challenges.”
Following the data, markets priced in more than a 50% chance that the ECB will cut interest rates by 50 basis points at the December policy meeting which sapped Euro support.
ING commented; “Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously.
We think it’s the latter.”
This content was originally published on ExchangeRates.org.uk