A Mixed End to the Week for Britain and the EU

Alan Penny

30 November 2019

2 min read

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  • UK November Nationwide Housing Price Index advanced by 0.5% on a monthly basis
  • UK GFK Consumer Confidence remains unchanged
  • Tories remain ahead in the polls
  • Germany’s performance very poor in recent quarters

The latest UK data was above market expectation, but the GFK Consumer Confidence Survey and October Mortgage Approvals will remain at the forefront for investors this Friday. 

In the political sphere, YouGov MRP poll has also shown that Labour is on track for 211 seats. However, the Conservative advantage has been shrinking these last couple of days. If this negative trend continues, it could lead to a hung parliament.

The EU also released important data this Friday which could have a big influence on the further European Central Bank decisions.

November housing data beats expectations

The UK has published the November Nationwide Housing Price Index which advanced 0.5% MoM and by 0.8% YoY, beating the market’s expectations. The pound has advanced on the back of positive data, but all eyes this Friday were on the GFK Consumer Confidence Survey. October Mortgage Approvals and Money data also garnered attention.

the early election and situation around Brexit remain the main driver for the pound

Despite this, the early election and situation around Brexit remain the main driver for the pound. It is also important to mention that the currency was recently supported by the YouGov MRP poll. This projects that the Tories would get an advantage of 68 seats in the upcoming December election. A Tory victory is so far widely expected, and an alternative scenario of a Labor Party election victory would send the pound lower.

Germany’s poor performance

On the other side, the EU has released the November Economic Sentiment Indicator, which was better than expected at 101.3. Consumer Confidence remained unchanged at -7.2.

The preliminary estimate of German November inflation missed the market’s expectations. Germany has performed very poorly in recent quarters, partly because of concerns over global demand. It is the Eurozone’s largest economy, and with the country struggling, the Eurozone will have big problems.

This is certainly not good for the strength of EUR. It means the European Central Bank may have to step up bond purchases. They could also cut interest rates further to support the flagging Eurozone economy.

Background noise and conclusion

This Friday was quite busy, with Germany also releasing October Retail Sales and November unemployment data. ECB President Christine Lagarde said the region as a whole grew at a slower rate, and the EU should introduce a new policy mix that includes fiscal stimulus. This continues to spell a troubled road ahead for the union.

Written By
Alan Penny

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