Data overnight from statistics firm GfK revealed that UK consumer confidence remained unchanged in April at -13. The data showed that people in the UK remained in a negative state of mind about making major purchases, although not notably worse than in the previous period. GfK Client Strategy Director Joe Staton said: “Despite the political carry-on consumers remain unshaken by the daily headlines of turmoil and intrigue.”
Meanwhile, on Monday the US Commerce Department found that American consumer spending rose by the most in a decade.
While this figure was impressive, however, price pressures in the US economy were muted.
Key inflation figures posted their smallest annual gain in 14 months, which likely weighed on the greenback.
Over the course of today and Wednesday Federal Reserve officials are due to meet to assess the US economy and the future course of monetary policy.
Commenting on this, Chief Economist at MUFG, Chris Rupkey said: “The economy is in a sweet spot for now with not enough inflation to cause the Fed to raise rates, and with inflation not low enough to worry Fed officials that economic demand is weakening, which could require rate cuts.”
Core personal consumption expenditures (PCE), the Fed’s preferred inflation measure edged down to 1.6 per cent in March, from 1.7 per cent in February.
Larry Kudlow, the White House Economic Advisor suggested that slowing inflation may open the door for Fed rate cuts.
However, not all economists are convinced.
Jesse Edgerton at JPMorgan said: “These below-target rates of inflation will likely be acknowledged by the Fed at this week’s meeting, but we still think it’s unlikely that the Fed would be prompted into rate cuts by weak inflation readings alone.”
Looking ahead to this afternoon, the US dollar could rise against the pound following the release of the US Chicago Purchasing Managers’ Index (PMI).
If April’s PMI rises higher than forecast, the dollar could receive an upswing of support.
Tomorrow, Sterling could come under pressure following the release of the latest UK Markit manufacturing PMI.
If data reveals growth in the manufacturing sector has slowed in April, the pound could fall on fears that the Eurozone manufacturing woes have spread to the UK.