Pound Weakens As BoE Warns Of Elevated Risks For U.K. Financial Stability

30.11.16 13:29

BRUSSELS (dpa-AFX) - The pound declined against its major rivals in the European session on Wednesday, after the Bank of England warned that the outlook for U.

K. financial stability remains challenging, citing instability emanating from the Brexit vote as well as challenges posed by the U.S. election outcome.

In its half-yearly Financial Stability Report, the bank said the economy has entered a period of adjustment following the referendum. The likelihood that some U.K. specific risks to financial stability could materialize remains elevated.

Risks associated with the global environment also remain elevated, the bank cautioned. The US election has reinforced existing vulnerabilities.

The currency was also weighed by a sharp fall in U.K. consumer confidence in November.

The latest survey from GfK showed that its gauge of consumer confidence fell to -8 in November from -3 in October.

Investors also keep an eye on a slew of U.S. economic data, including private sector employment, personal income and spending, pending home sales and the Fed's Beige Book survey for further clues on the path of interest rate increases this year and next.

The currency held steady against its major counterparts in the Asian session.

The pound declined to 1.2419 against the greenback, following a high of 1.2515 hit at 4:15 am ET. The pound-greenback pair is seen finding support around the 1.22 mark.

Pulling away from an early high of 1.2679 against the Swiss franc, the pound edged down to 1.2592. The pound is likely to locate support around the 1.22 region.

Data from the investment bank UBS showed that Swiss consumption indicator improved on domestic tourism in October.

The consumption indicator rose to 1.49 points in October from 1.47 in September.

The pound, having advanced to a 5-day high of 141.52 against the Japanese yen at 4:20 am ET, eased back to 140.35 in subsequent trading. On the downside, 138.5 is possibly seen as the next support level for the pound.

Data from the Ministry of Land, Infrastructure, Transport and Tourism showed that Japan's housing starts increased at a faster pace in October.

Housing starts climbed 13.7 percent year-on-year in October, following a 10 percent rise in September. Economists had forecast growth to rise to 11 percent.

The pound weakened to a weekly low of 0.8578 against the euro, off its early high of 0.8509. Continuation of the pound's downtrend may see it challenging support around the 0.88 area.

Flash data from Eurostat showed that Eurozone inflation accelerated as expected in November on food prices.

Inflation rose to 0.6 percent in November from 0.5 percent in October.

Looking ahead, at 7:30 am ET, European Central Bank President Mario Draghi is expected to speak about the future of Europe at the University of Deusto Business School, in Madrid.

At 8:00 am ET, Federal Reserve Bank of Dallas President Robert Kaplan is expected to speak before the Economic Club of New York.

In the New York session, U.S. ADP private sector jobs data for November, U.S. personal income and spending data for October, U.S. Chicago PMI for November, U.S. pending home sales data for October, U.S. crude oil inventories data, Canada GDP data for September, industrial products and raw materials price indexes for October are set to be announced.

At 11:00 am ET, German Bundesbank President Jens Weidmann is expected to speak at the Axica Conference Center, in Berlin.

At 11:45 am ET, Federal Reserve Governor Jerome Powell will deliver a speech titled "The View from the Fed" at the Brookings Institution, in Washington DC.

Copyright RTT News/dpa-AFX


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