Daily Foreign Exchange Market Update

Wed, February 15, 2012

The Pound held fairly firm against the Euro in the foreign exchange market yesterday, but closed out the day significantly lower versus the US Dollar. The GBP/EUR exchange rate finished the day at 1.1932, after opening at 1.1945; with the GBP/USD exchange rate falling from the morning’s open at 1.5730 to trade down at 1.5689 by the close of the UK business day. The key economic data released from the UK yesterday was positive, with CPI (inflation) figures for January showing that price-growth fell annually from 4.2% to 3.6% and month-on-month from 3.0% to 2.6%; which is the lowest level fro 14 months, and the sharpest monthly decline since 2008.

Today will see plenty of significant data cross the wires; with the market focus likely to be on the jobless claims numbers for January, and the Bank of England’s inflation report. The jobless numbers are expected to show a small increase; which would not be positive news for the Pound and the UK economy overall. The Bank of England’s report will possibly give some insight into the central bank’s view on how the increase to their quantitative easing policy will affect price growth in the coming months, and also explain the recent drop in inflation.

The Euro lost a small amount of ground against both the Pound and the US Dollar in the currency exchange market yesterday. The EUR/USD exchange rate fell from 1.3167 at the morning’s open, to trade down at 1.3148 by the market close. Akin to the Pound though, economic data released from the Euro-zone was positive despite the currency’s fall; with German and Euro-zone ZEW economic sentiment survey’s showing sharp increases in positivity, which should have seen the single-currency find some strength.

The single-currency wasn’t helped this morning with the news that European finance ministers have cancelled their scheduled meeting to move forward with supplying extra funding to Greece, as they are still awaiting confirmed written commitment from the nation’s politicians that that it will press ahead with promised austerity measures; regardless of upcoming election results. The market will also be looking to advance readings of 4^th quarter GDP from Germany and the Euro-zone overall – with any downward revisions having the potential to put huge pressure on the Euro.

The US Dollar continued to advance across the board, as weakening of both the Pound and the Euro despite fairly positive key data allowed the Greenback to benefit from its ‘safe-haven’ status. The currency was also helped by positive advance retail sales figures, which showed that for the month of January, sales grew from 0.0% to 0.4%, which is despite January traditionally being a very tight month for consumers.

Today will see the release of industrial production figures, which are forecast to show an increase for the month of January; but most of the market focus is likely to be on the evening’s release of the minutes from the Federal Reserve’s last meeting. The minutes will give market participants some insight into the current feeling amongst policy-makers, their assessment of the current economic situation, both in the SU and abroad and also the expectations for the coming months in terms of both economic growth and price pressures.

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

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