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Daily Foreign Exchange Market Update 04/10/2011

Tue, October 04, 2011

The Pound made a small gain against the Euro; but fell against the US dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate picked up from the morning’s open at 1.1639 to trade at 1.1657 by the day’s close. There was further upward movement after the end of the UK business day, with the rate moving up towards 1.1700 territory. The GBP/USD exchange rate however fell across Monday, from 1.5544 at the day’s open, down to 1.5474 by the market close. The sole piece of economic data released from the UK yesterday showed that PMI manufacturing increased in September, up to 51.1 from the previous month’s level of 49.4.

This morning will see the release of September’s PMI construction figure, with the market forecast for a slight drop in the index; but with yesterday’s manufacturing figure coming in above analysts’ estimates; the pound could benefit slightly from another improved figure.  

The Euro lost ground against both the Pound and the US Dollar in the currency exchange market yesterday. The EUR/USD exchange rate slipped from the morning’s open at 1.3355, to trade at 1.3274 by the end of the UK business day, and continued to drop overnight. There was positive news in terms of economic data from Europe yesterday, with German and Euro-zone PMI manufacturing figures both increasing in September, from 50.0 to 50.3 and from 48.4 to 48.5 respectively; but the currency is coming under huge pressure due to the ongoing Greek debt crisis. Greece has already missed its deficit target for 2012, and European officials are still yet to agree terms for Finland’s demand for extra collateral to underpin bailout loans, which would go some way to finding resolution to ensure Greece receives its sixth bailout payment. The knock-on effect of a default is what has the market spooked, and it is being mooted that the ECB will have to become actively involved in security and bond buying to try and protect European banks from any damaging effects.

Today will see the release of Euro-zone PPI figures for August, with the expectation for a drop in both the annual and monthly levels, which would not be positive news for the currency, and could, heap further pressure onto the Euro; which has fallen rapidly across the market in the last 24 hours.

The US Dollar once again has returned to form, and benefits from its ‘safe-haven’ status with the increased woes across Europe. As the market is starting to expect some from of European recession, the Dollar gained across the board; and this could well be attributed to a shift in risk sentiment towards the currency. As well as the Euro-zone and the UK reporting manufacturing figures yesterday, the US released September’s ISM manufacturing figures, which showed a positive gain, from 50.6 to 51.6.  

The US will release Augusts’ factory orders figures later today; and despite a good gain in yesterday’s manufacturing index, the market forecast is for a rapid drop in factory orders. Even if this is the case, the figure is likely to be overshadowed by Federal Reserve Chairman Ben Bernanke’s appearance in front of the joint Economic Committee today. Chairman Bernanke will be grilled on the ‘economic outlook’ for the US, and is likely to face questions on growth prospects, ‘Operation Twist’ and the US’s bank exposure to Europe; with the currency primed to take direction from the Chairman’s comments.

This Daily Market Update is brought to you by The Market Team @ KBRFXExchange Rate, Currency Conversion & Foreign Currency Transfer specialists.

Data Releases

Day Time Currency Event
TUE 09:30 GBP GBP Purchasing Manager Index Construction
TUE 10:00 EUR EUR Euro-Zone Producer Price Index (MoM)
TUE 10:00 EUR EUR Euro-Zone Producer Price Index (YoY)
TUE 15:00 USD USD Fed Chairman Bernanke to Testify Before JEC
TUE 15:00 USD USD Factory Orders

Foreign Exchange Rates

GBP/USD 1.5383
GBP/EUR 1.1681
EUR/USD 1.3164
GBP/JPY 117.89
GBP/CHF 1.4183
GBP/AUD 1.6286
GBP/CAD 1.6242
GBP/NZD 2.0421
GBP/SGD 2.0213
GBP/HKD 11.9727
GBP/CZK 28.990
GBP/PLN 5.1310
GBP/SEK 10.6774
GBP/DKK 8.6895
GBP/NOK 9.1459
GBP/THB 47.88
GBP/ZAR 12.6648

*These are indicative rates only, based on interbank prices at the time of writing. For exact rates please contact our dealing team

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