- Pound (GBP) is falling after gains yesterday
- BRC consumer confidence falls to the lowest level since the survey started
- Euro (EUR) is unchanged even as German sentiment deteriorates
- German consumer morale fell to -28 heading to April
The Pound-Euro (GBP/EUR) exchange rate is falling after gains yesterday. The pair rose 0.12% in the previous session, settling on Wednesday at €1.1564. The pair traded between €1.1534 and €1.1569. At 14:30 UTC on Thursday, GBP/EUR trades -0.12% at €1.1550.
The pound is falling as UK consumer sentiment deteriorates to its weakest level in over two years. UK households’ expectations surrounding their own finances and the state of the economy have dropped sharply as the Middle East conflict raises the likelihood of higher inflation.
British Retail Consortium data showed that household views on the health of the economy over the coming three months were -53 in March, down from -13 in February. Meanwhile, their assessment of their own finances fell to -17 from -6, both marking the lowest readings since the survey began in March 2024.
The data comes after inflation held steady at 3% year-on-year in February, before the start of the Iran war.
However, UK gilt yields are approaching 4.85%, an almost 18-year high. Markets are now pricing in three Bank of England rate hikes, with a 70% chance of a move next month and a second rate hike fully priced in by July.
The euro is rising against the pound but falling against the US dollar as investors continue to monitor rising oil prices and conflicting information over potential de-escalation in Iran.
Meanwhile, on the data front, German consumer sentiment slumped in April.
According to data from GfK, German consumer sentiment is set to deteriorate heading into April as households brace for rising energy prices, driven higher by the war in Iran, and rising inflation, which could hold back Germany’s economic recovery.
The sentiment index fell 3.2 points to -28 for April. This was below the -27 that economists had forecast. Consumer income expectations fell into negative territory amid worries that inflation could eat into purchasing power. Meanwhile, economic expectations were at their lowest level since December 2022.
Weak consumer confidence often translates into slower spending, which bodes poorly for the economy.