Mon, May 29, 2023 @ 23:05 GMT
HomeContributorsFundamental AnalysisPound Dips as US Consumer Confidence Soars

Pound Dips as US Consumer Confidence Soars

GBP/USD has edged lower in Tuesday’s North American session. Currently ,GBP/USD is trading at 1.2530. On the release front, it’s another quiet day, with no UK events on the schedule. In the US, CB Consumer Confidence rocketed to 125.5, crushing the estimate of 113.9. There was also good news on the manufacturing front, as the Richmond Manufacturing Index improved to 22, well above the forecast of 16 points.

The dollar is showing some strength in North American trading, courtesy of a spectacular reading from CB Consumer Confidence. The key indicator surprised the markets by climbing to 125.5, its highest level since December 2000. Clearly, consumers remain optimistic about the economy, and a major factor in this sentiment is the red-hot labor market, which remains close to capacity. An increase in consumer confidence often translates into stronger consumer spending, which would be bullish for the US dollar, which has headed lower since the Federal Reserve rate hike on March 15. We’ll get a look at consumer spending data on Friday, with the release of Personal Spending.

Donald Trump suffered his first major setback as president last week, as his bill to replace the Affordable Care Act was pulled before it even went to a vote. Trump is used to giving the orders in the private sector and on reality TV, but he didn’t get his way on healthcare, despite the Republicans enjoying a majority in Congress. This bruising defeat has sent the US dollar sharply lower, and sent market jitters higher. Trump’s administration has stumbled out of the starting gate, and after more than two months in office, he has yet to provide any details over even an outline of economic policy. The inquiry into the Trump administration’s links with Russia is gathering steam, and is another cause for concern for nervous investors. Trump has said he will now focus on tax reform, but he has his work cut out, trying to convince a skeptical Congress and general public that he can deliver the goods and pass new, effective legislation.

Britain departure from the European Union will move into second gear on Thursday, as the government formally gives notice to its EU colleagues of its intent to withdraw from the club. However, actual negotiations between the parties may not commence until June, according to recent statements from EU policymakers. The negotiations are supposed to be conducted over a two-year period, and promise to be tough and perhaps acrimonious. The EU cannot afford to "go easy" on the UK and give it a sweet deal, since this would provide ammunition to euro-skeptics on the continent who also want to quit the EU. For its part, the British government needs to reach what it considers a fair deal, and has threatened to leave the EU without a deal if the EU is intransigent in the negotiations.

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