The GFK Consumer confidence survey released this morning provides a gloomy outlook amongst consumers, hitting a 4 month low which has lead to noticeable Pound Sterling weakness. The dip in consumer confidence is likely to be linked to ongoing Brexit uncertainty, coupled with a fall in the Pound’s value and higher consumer prices.
Whilst yesterday’s strong mortgage and lending approvals highlighted a significant rise in spending habits, the complexities surrounding the UK’s vote to leave the EU and the stark warnings from both UK and EU officials have left consumers worried about the future of the UK.
Justin King – the former Sainsbury’s boss has warned that supermarkets face a 5% increase in prices over the next 6 months, as a falling Pound drives up the price of goods in the UK. King’s message has been echoed by many economists including the Bank of England, who predict higher inflation in 2017. As the Brexit uncertainty continues businesses will be less reluctant to improve wages which could hit the poorest families in the UK.
The UK economy has so far defied post-Brexit forecasts, but as the reality begins to sink in consumer spending could suffer as a result of the governments unclear Brexit strategy.
Pound to Euro exchange rates reverse their recent gains
GBP/EUR exchange rates have fallen over half a cent since the beginning of the trading session, amplified by strong Eurozone Consumer Price data released at 10 am. Sterling to Euro exchange rates remain volatile for the remainder of the week as markets await the Italian Referendum on Sunday, which could result in PM Matteo Renzi resigning.
The outcome of the Brexit Supreme Court challenging will be announced early next week, which could allow Theresa May and government to trigger Article 50 without Parliamentary consent, officially beginning the process of leaving the EU.
This could have negative implications for Sterling, as clues have suggested that May plans to take the UK out of the single market with her slogan ‘Brexit means Brexit’.
The Italian Referendum on Sunday has the potential to cripple Euro exchange rates, as a ‘No’ vote to banking reforms in Italy could put an end to Matteo Renzi and up to 8 Italian banks could be on the verge of collapse.
IF market turbulence prevails as a result of next week’s Referendum, Italy could face another banking crisis, the Financial Times reports.
On the one side, we could have Pound strength if the Supreme Court block Theresa May from triggering Article 50 alone, and on the flip side, Euro strength if the Italians vote for banking reforms.
Current exchange rates
The below table provides current exchange rates which are accurate at the time of writing.
|Currency Pair||Current Interbank Exchange Rates|
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