GBP/USD Trades Narrowly as Squeeze on Finances Continues to Weigh on Consumer Spending
The Pound US Dollar (GBP/USD) exchange rate is trading flatly this morning as markets react to the latest report on the state of UK household finances.
At the time of writing the GBP/USD exchange rate trading close to the morning’s opening levels.
Pound (GBP) Stumbles as Household Finances Remain Under Pressure
The Pound has seen limited movement this morning against the US Dollar following a report outlining the financial pressures facing UK households.
According to data published by IHS Markit, the UK’s Household Finance Index (HFI) fell from 42.9 to 42.2 in February, the lowest reading since July.
This report signalled that consumers are continued to be squeezed by strong inflationary pressures and weak wage growth.
This is expected to continue to dent the UK’s economic growth as consumer spending continues to be strained by the erosion in household finances.
Tim Moore, Associate Director at IHS Markit, said
‘In response to squeezed incomes and concerns about the financial outlook, households appear to have reined in spending, particularly on big-ticket items.’
US Dollar (USD) Recovery to Find Traction?
At the same time the US Dollar is holding steady this morning as the currency looks to stabilise after mounting a recovery last Friday.
This comes after the US Dollar saw significantly losses last week, especially against the Euro, with USD/EUR briefly tumbling to a three-year low.
While in a holding pattern this morning, some analysts are suggesting that Friday’s rally in the US Dollar could be the start of a stronger recovery.
Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo, said;
‘The slide by the dollar last week was perhaps overdone, As such we are seeing the dollar rebounding, which is quite natural given the scale of its recent fall.’
GBP/USD Forecast: UK Employment to Accelerate?
Looking ahead movement the GBP/USD exchange rate this week is likely be driven by the release of the UK’s latest labour statistics.
Economists forecast that while the unemployment rate is likely to remain unchanged, figures will show that employment growth will have ticked higher at the end of 2017.
However it likely to be the accompanying wage figures that investors focus on, with GBP investors hoping that a possible jump in wage growth will bolster Sterling.
Meanwhile movement in the US Dollar this week will likely be dictated by the tone of the minutes from the latest Federal Reserve policy meeting.
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