GBP
In August data was released that the UK recorded the biggest slide in consumer confidence for more than 26 years in July 2016. Consumers were on average gloomier about their own finances and the broader economy .The gauge of consumer confidence fell to -12 from -1 in June, the biggest drop since March 1990 - when Margaret Thatcher was prime minister and interest rates sat at 15 percent. U.K. manufacturing shrank more than initially forecast in July, showing the biggest drop in over three years. The Purchasing Managers’ Index slumped to 48.2, from 52.4 in June. Figures released during the month of June showed investors pulled more from UK investment funds than at any time during the financial crisis of 2007/08. The Pound fell sharply in August after the Bank of England cut interest rates for first time since 2009, and said it would take "whatever action is necessary" to achieve stability in the wake of Britain's vote to leave the European Union. The BoE also expected the economy to stagnate for the rest of 2016 and suffer weak growth throughout next year. As expected it cut its main lending rate to a record low 0.25 percent from 0.5 percent. Bank of England Governor Mark Carney said the economic outlook had changed markedly following the Brexit vote and that more than a quarter of a million people are due to lose their jobs. The Bank had offered to buy government bonds, or gilts, as part of its new quantitative easing (QE) programme to stimulate the economy. But the bank fell £52m short of its £1.17bn target when it failed to find enough sellers. Prices continued to rise, although at the slowest pace in three years. With both demand and sales dropping in July, the near-term outlook for the U.K. housing market is dominated by Brexit. Consumer price rises gathered speed, up 0.6 percent in July compared with a year earlier, their biggest rise since the end of 2014. Data showed producer prices rose by 0.3 percent in July, compared with the same month last year, stronger than a median forecast. The pound strengthened after strong retail sales figures showed Britain’s shoppers have been spending in the warmer weather. Government income fell in July with tax receipts missing expectations in the first sign of a post-referendum hit to the public finances. The government's total debt fell over the month, and the debt-to-GDP ratio also dipped from 83.8 per cent this time last year to 82.9 per cent. Orders for British manufacturing exports hit a two-year peak in August, data released on Tuesday showed. Combined with July inflation and retail sales numbers released the week before - beating forecasts - signs are that consumers had yet to rein in spending after June's vote to leave the European Union. Lower than expected jobless claims also gave the pound a lift. The number of mortgages that have been approved by banks has fallen to the lowest level in 18 months according to figures released by the Bank of England. USD The U.S. economy grew far less than expected in the second quarter. Inventory investment fell for the first time in nearly five years, but a surge in consumer spending pointed to underlying strength. The report raises the risk to the outlook at a time Federal Reserve policy makers are looking for sustained improvement. While consumers were resilient last quarter, businesses were cautious, cutting back on investment and aggressively reducing stockpiles amid weak global markets, heightened uncertainty and the lingering drag from a stronger dollar. U.S. consumer spending rose but the markets focused more on Tuesday's lacklustre inflation numbers. Economists say this, together with weak business investment and the second quarter's anemic economic growth rate, could encourage the Fed to keep interest rates at current low levels for a while. U.S. retail sales were flat in July as Americans cut back buying clothing and other goods, suggesting a moderation in consumer spending that could dampen expectations of an acceleration in economic growth in the third quarter of 2016. Policymakers expect that a US interest rate increase will be needed soon, although there is general agreement that more data is needed before such a move. The Office for National Statistics confirmed that GDP growth picked up to 0.6% in the second quarter, as expected, from 0.4% in the first quarter. In year-on-year terms, GDP was up 2.2% on the year, also in line with forecasts. EUR The banks of Europe are again in the spotlight as profits sink. About two-thirds of Europe’s largest banks have lost more than 20 percent this year alone, behind only energy and mining companies as the biggest losers this year. German Chancellor Angela Merkel said the European Union needs to show it can prosper without the U.K. as she and the leaders of France and Italy sought to chart a way forward for Europe. With future relations between the EU and the U.K. in limbo for now, continental leaders are trying to move toward an initial vision of the post-Brexit bloc for a summit of all 28 EU countries except Britain next month. Merkel will talk to another 13 leaders between Wednesday and Saturday as she canvasses opinion before in-depth talks at the meeting in Bratislava on Sept. 16.
