Market Update

British consumer confidence ticked up in September to its highest level since the coronavirus lockdown started in March, but it remains well below its pre-pandemic levels, a survey showed this morning.

The GfK Consumer Confidence Barometer rose unexpectedly to -25 in September from -27 in August. A poll of economists had pointed to an unchanged reading.

The survey was conducted in the first half of the month – before Tuesday’s announcement of new social restrictions to curb a resurgence of the COVID-19 pandemic across the United Kingdom.

Despite subdued confidence surveys, consumer spending in Britain has rebounded strongly since the initial shock of the lockdown in April, and retail sales are now higher than before the pandemic.

But the prospect of rising unemployment makes many economists cautious, especially since finance minister Rishi Sunak confirmed yesterday that support for furloughed workers would be scaled back sharp from November onwards.

Sunak said the government was only willing to continue to subsidise workers whose jobs would be viable in the long-term, and that others would need to find new work.

The Recruitment and Employment Confederation said nearly 129,000 job postings were published last week, the highest number since lockdown started.

Importantly, Tuesday’s (coronavirus) announcements did not close down significant parts of our economy, so we can hope that the trend of improvement we have seen over the summer continues.

The British currency is under pressure after the Bank of England did not exclude the possibility of negative rates, which is seeing as a downside risk for sterling.

BoE Governor Andrew Bailey said on Thursday the bank is seeking answers on the suitability of sub-zero rates.

Sterling has lost 4.9% against the dollar in September so far and is on course for its worst month since October 2016, as talk of negative rates, the looming risk of a no-deal Brexit and new lockdown measures weigh down the currency.

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