As mentioned above, today’s pound euro exchange rate gains are partly down to Eurozone inflation rate stats not matching up with forecasts.
September’s basic annual inflation rate estimate has gone up from 2 per cent to 2.1 per cent as forecast, but the core estimate has dropped from 1 per cent to 0.9 per cent; expectations had been for growth to 1.1 per cent.
This is a significant result because the core reading is considered the more accurate of the two – it cuts out volatile factors like food and fuel prices.
Slowing core inflation means reduced chances of a near-term European Central Bank (ECB) interest rate hike, as it lowers the pressure on ECB policymakers to act.
Today’s UK news has been mixed, but not sufficiently negative to cause GBP/EUR exchange rate losses.
First up has been GfK’s consumer confidence reading for September, which has shown a reduction from -7 points to -9.
While a relatively small shift, this result still means worsening confidence levels.
GfK Client Strategy Director Joe Staton said of the data: “There are fewer than 200 days until Brexit arrangements in some shape or fashion take effect.
“When respondents talk about their personal finances, the scores are still positive.
“But for the general economy, they can only reflect on the obvious uncertainty surrounding Brexit.”
The latest news about Brexit has had a limiting effect on Sterling demand today – the British Chambers of Commerce (BCC) has reported that nearly 66 per cent of surveyed businesses aren’t planning for a no-deal Brexit.
BCC Director General Adam Marshall has highlighted the problems faced by smaller businesses: “Many smaller firms don’t have the capacity to scenario plan, don’t think they’ll be affected or have simply switched off from the process altogether.”
Most recently, finalised quarterly and annual UK GDP growth has been confirmed higher in Q2 2018, but the yearly rise was below forecast levels.
PMIs will be in the spotlight next week, with Monday bringing UK and Eurozone-wide manufacturing data for September.