GBP Falls As Consumer Confidence Drops!

GBP/USD has been falling for the last few days. The pound fell a third day versus the dollar as data showing U.K. consumer confidence dropped in July and house prices grew at the slowest pace since April 2013 damped demand for Britain’s currency. But it appears that the drop is now near its bottom. GBP/USD is finding it difficult to break the 61.8% fibonacci level. If it rebounds from this 61.8% fibonacci retracement level,  it can touch 1.72000 level again.

The “edge is coming off” the U.K. housing market and that may start to affect the wider economy by the end of the year, according to Bank of England Deputy Governor Ben Broadbent. You must keep an eye on the UK economy and the BOE if you want to trade GBP/USD. Now this post was written some 2 years back. Lot of water has passed under the bridge during these 2 years. Today GBP/USD is trading around 1.20000. A few months back, people voted for leaving the EU. This is known as Brexit. Just over the weekend the British Prime Minister May said that Brexit will be painful for UK economy. Statements like these are driving GBP/USD down. Analyst are predicting that GBP/USD will fall more as the Brexit proceedings start.

If you have been a student of economics you should have this idea now that markets work on the basis of expectations. If the people believe price will go up. Price will start going up. This is precisely the reason why when people think that inflation is going high, it goes high. In the same manner consumer confidence is also an expectation measure. When people believe that things are not working in the economy they will try to delay major purchases and adjust their expectation of the economic future.

Consumer Confidence is an important economic news that can move the currency a lot. In UK a consumer confidence index keep track of this important market sentiment on monthly basis. Consumer Confidence Index is measured through a consumer survey in which households are asked for their plans for major purchases as well as their economic situation based on their current expectation as well expectation for the future. Did you read the post how USD is making gains and is now at many months best? In the context of GBP/USD when USD makes gains, this pair starts falling. This should be obvious. USD is in the denominator. So when USD becomes strong, GBP/USD weakens.