Britain’s messy election outcome and a weakening of the housing market have caused a sharp of loss of confidence among consumers, leaving the country dependent on exports to avoid a recession, according to a survey published today.
An index of consumer confidence produced by polling firm YouGov fell back to just above levels last seen just after last year’s shock referendum decision to leave the European Union.
The euro rose to the day’s highs today after European Central Bank President Mario Draghi said there are clear signs of a “strengthening and broadening” recovery underway in the euro zone area.
Draghi said the ECB sees growth that is above trend and well distributed across the euro area, but reiterated that “a considerable degree” of stimulus is still needed in the euro zone, and that the ECB must be “prudent” in how it unwinds it.
“As the economy picks up we will need to be gradual when adjusting our policy parameters, so as to ensure that our stimulus accompanies the recovery amid the lingering uncertainties,” he said.
The comments came during the keynote speech at the ECB’s central banking forum in Portugal.
Draghi said the ECB’s policies have been effective in rebuilding inflation, but noted that the reflationary process was being slowed by a combination of external price shocks, more slack in the labor market and changing relationship between slack and inflation.
The dollar edged lower against a basket of currencies this morning, as investors awaited speeches by Federal Reserve officials for signs on whether the central bank will stick to its guns and raise rates this year.
Fed officials have signaled they will look through a slowdown in inflation and continue on their current trajectory of interest rate hikes – though investors are skeptical and market pricing shows only a 40 percent chance of a rise at the Fed’s December meeting.
Fed Chair Janet Yellen addresses the British Academy in London at 1700 GMT, less than two hours after an address by Philadelphia Fed President Patrick Harker in the same city at 1515 GMT