Sterling Drops vs. Euro on Weak Consumer Confidence

The Great Britain pound fell against the euro today as the report showed that the consumer confidence worsened in February to the record low. The currency rose versus the US dollar and the Japanese yen.

The consumer confidence index of the Nationwide Building Society dropped from 48 to 38 in February. That’s the lowest level since the survey began in May 2004. Market participants expected the index to remain unchanged. The poor consumer sentiment spurred talks that the economic recovery in the UK will stall and the Bank of England will refrain from increasing of the interest rates.

Jane Foley, the senior foreign-exchange strategist at Rabobank International commented about the moves of the pound:

Consumer confidence was certainly weak, and goes to show that sterling will remain on the back foot,. The market has reined in its expectations of Bank of England rate hikes this year.

Hans-Guenter Redeker, the global head of foreign-exchange strategy at BNP Paribas supported the outlook for a weaker currency:

Sterling will remain in its under-performing position. So long as the BOE sits on its hands and abstains from raising rates, the UK’s negative real rates will continue to go south.

EUR/GBP rose from 0.8682 to 0.8736 today. GBP/USD closed at 1.6232 after it opened at 1.6142, while the closing price of GBP/JPY was 130.78, compared to the opening price of 127.65.

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