- UK Consumer Confidence hits 15-month high
- BoE’s Bailey warns of wage-price spiral
The British pound has pushed higher on Friday. GBP/USD is trading at 1.2449 in North America, up 0.32% on the day.
The week is wrapping up on a positive note, as UK GfK Consumer Confidence index improved for a fourth straight month. That’s not to say that the UK consumer is in a cheery mood. The index improved from -30 to -27 and has been stuck in negative territory since 2016. Still, there has been steady movement upward in recent months and today’s reading marked a 15-month high. Energy prices have come down and consumers are feeling better about their personal finances. An improvement in consumer confidence often translates into stronger consumer spending, which would be good news for the UK economy.
BoE Bailey’s warns of wage-price spiral
Bank of England Governor Bailey warned the markets this week that rate hikes were on the table and he would tighten policy if inflation remained persistent. The central bank has been unable to curb inflation, which remains in double-digits, despite an aggressive rate-tightening campaign which has raised the cash rate to 4.50%. The BoE has been content with small hikes of 25 basis points and has insisted that inflation will fall rapidly, but there is pressure on the Bank to deliver larger hikes in order to curb red-hot inflation.
Bailey acknowledged this week that the UK was in the midst of a wage-price spiral, which will make the battle against inflation that much more difficult. Public sector employees continue to strike, in an effort to secure higher wages in response to the cost-of-living crisis. The government will likely have to cough up more money for the workers, which will lead to higher inflation.
The US debt ceiling crisis is weighing on the financial markets, but it seems likely that lawmakers will reach an 11th-hour agreement. Lawmakers don’t want to be blamed for the US defaulting on its debt for the first time ever, and Republican House Speaker McCarthy says there could be a vote on a debt ceiling agreement next week.
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GBP/USD Technical
- There is support at 1.2366 and 1.2289
- 1.2474 and 1.2604 are the next resistance levels
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- Source: https://www.marketpulse.com/news-events/central-banks/british-pound-rises-as-consumer-confidence-improves/kfisher
