The pound dropped against its major rivals during the overnight trade after Gfk consumer confidence fell to its lowest level since 2008. The headline index fell by two points to –32 from September, increasing the risk that the economy as a whole could contract in fourth quarter. UK consumer confidence has been undermined this year by inflation that is almost double the wage growth and the largest government budget squeeze since World War II. Bank of England official Paul Fisher said yesterday that growth in UK “may be not much better than flat” in the fourth quarter and there is “significant” chance of another recession. BoE policymakers expanded stimulus program this month for the first time since 2009 as Eurozone debt crisis melted financial markets and data showed that UK GDP barely rose in second quarter. With light economic calendar for the reminder of the week expect for the pound to remain under pressure against its major rivals as economic recovery in Britain stalls.
The euro gained across the board after European Union leaders agreed to expand the rescue fund for indebted nations and reached an accord with lenders on writedowns for Greek debt. The officials agreed to boost the region’s rescue fund (EFSF) capacity to 1 trillion euro and managed to persuade holders of Greek bonds to accept a 50% writedown on the country’s debt. Looking ahead to today, French Consumer Spending headline the economic calendar, with the expectations for the figures to weaken further in September.
The dollar consolidated against its major rivals during the Asian session as risk aversion in the markets eased after EU leaders reached the agreement regarding debt crisis and US economy grew at fastest pace in a year in Q3. US GDP figures released yesterday showed that world’s largest economy expanded at a 2.5% annual rate in the period from July through September. Federal Reserve policymakers are meeting next week and are considering additional measures of their asset purchase program in order to reduce an unemployment rate that has been stuck at 9% or higher since 2008. Looking ahead to today, university of Michigan Confidence headline the economic calendar, with the expatiations for the October figures to have improved from previous reading.
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