The British pound has posted gains in the Monday session. In North American trade, GBP/USD is trading at 1.3179, up 0.39% on the day. On the release front, British Net Lending to Individuals came in at GBP 5.5 billion, matching the estimate. In the US, Personal Spending gained 1.0%, above the forecast of 0.8%. On Tuesday, the US will publish CB Consumer Confidence.
British consumer spending took a hit in October, according to last week’s British CBI Realized Sales report. The soft reading, which was the sharpest drop since March 2009, was all the more surprising because the September reading showed a strong gain of 42 points. High inflation is likely having a chilling effect on consumer spending, a key driver of economic growth. The BoE will be taking note of the sharp drop in retail sales, as the Bank must decide at its policy meeting on Thursday whether to raise rates for the first time in a decade. Policymakers remain divided over a rate hike, which would be the first in a decade. Proponents of a rate increase point to inflation running at 3.0%, above the Bank’s target of 2.0%, but opponents argue that the economy is showing signs of weakness and a rate hike could hamper economic growth.
The week ended on a positive note in the US, as Advance GDP in third quarter jumped 3.0%, well above the estimate of 2.5%. The economy was boosted by strong consumer spending and business investment, as well as a strong export sector. The economy could have done even better in Q3, but hurricanes which hit Texas, Florida and Puerto Rico caused widespread damage. Consumer confidence remains strong, as Revised UoM Consumer Sentiment soared to 100.7 points in September, compared to 95.1 a month earlier. On Tuesday, CB Consumer Confidence is expected at 121.1 points.
