The Pound Sterling to Euro (GBP/EUR) exchange rate weakened more than 0.40% and the Pound Sterling to US Dollar (GBP/USD) exchange rate weakened by more than 0.25% on Friday.
The Pound Sterling to Euro (GBP/EUR) exchange rate fell to a session low of 1.3885
The Pound was weakened early in the session as a consumer confidence index released by research group GfK showed that British consumer confidence fell unexpectedly in May, raising some concerns that the UK economy will slow over the coming months.
According to the confidence index compiled by GfK, sentiment fell to its lowest level since Janaury. The index slipped from the +4 figure seen in April down to +1 in May. The report also showed that UK consumers were not expecting the next 12 months to be good for their wallets.
Also putting pressure on the Pound were concerns over the proposed referendum on whether the UK should leave the European Union or stay. Prime Minister David Cameron’s tour around Europe has left those wanting the UK to stay nervous, as leaders such as Germany’s Angela Merkel and France’s Francois Hollande have ruled out any large-scale reform changes being implemented. The more rebuffs Cameron gets the stronger the anti-EU movement is likely to get.
The Euro meanwhile received support from the release of stronger-than-forecast retail sales data out of Germany. Month-on-month sales jumped 1.7% in April to a six-month high. The figure beat expectations for a rise of 1%. The preceding months figures were also positively revised from -2.3% to -1.4%.
‘With German consumer confidence continuing to trend higher on the back of a record low unemployment rate, there are some positive factors that should provide some support to consumer spending once the impact of oil prices on income washes out,’ said economists from BNP Paribas.
The Pound Sterling to US Dollar (GBP/USD) exchange rate hit a session low of 1.5235
The Pound weakened against the US Dollar despite the release of worse-than-forecast US GDP data. According to the US bureau of Economic Analysis preliminary report, the US economy contracted by -0.7% in the second quarter of 2015, a figure that was worse than initial expectations for a gain of 0.2%. The decline was not quite as sharp as economist feared however. Losses for the ‘Greenback’ were restrained as economists still expect the US economy to rebound strongly in the second quarter.
‘The decline has already been largely shrugged off as a temporary blip by policymakers, linked to extreme weather, port closures and what looks to be a regular pattern in the official data of the economy weakening at the start of the year. Survey evidence is already pointing to a second quarter pick-up,’ said Markits chief economist Chris Williamson.
