US consumer confidence recovers, UK wages rise: economic wrap

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US consumer confidence recovers, UK wages rise: economic wrap



Pound at new 20-month high against Euro based on central bank shift bets

LONDON: Sterling touched a 20-month high against the euro on Tuesday, spurred by various interest rate expectations for Britain and the eurozone, though concerns about economic growth and relations with the European Union kept the currency overall on that day.

Money markets are pricing in an interest rate hike by the Bank of England at its November 4 meeting, helping the pound rally around 2 orshes against the euro and dollar so far this month.

Meanwhile, the euro is accompanied by signs that the European Central Bank will be among the last to raise interest rates in the developed world. Monday’s data showed that German business sentiment deteriorated for the fourth consecutive month in October, boosting expectations with an intimate message from Thursday’s European Central Bank meeting.

At 0850 GMT, the pound was trading at 84.2 pence to the euro, 0.2% stronger today at the highest level since February 2020, while against the dollar it was stronger at the level of $ 1.378, after reaching a five-week high touched last week.

However, weak UK economic data – including last Friday’s unexpected drop in retail sales – covers the rise in the pound.

Bilal Hafez, CEO of MacroHive told clients: “Euro sterling is trading near its lowest levels following the referendum on the Bank of England’s increased expectations. But Britain’s growth momentum is weak, which could see the euro-sterling turn around.”

There are also concerns about potential tax increases that could be revealed in Wednesday’s budget announcement, along with disagreements between the EU and the UK over provisions regulating post-Brexit trade between the UK and Northern Ireland and the EU member state.

Britain has threatened unilateral action if a solution is not found in the ongoing talks, which some believe could emerge as serious headwinds for sterling.





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