Daily Foreign Exchange Market Update

Fri, July 01, 2011

The Pound fell slightly against the Euro and the US Dollar in the foreign exchange market throughout the course of Thursday. The GBP/EUR exchange rate opened at around 1.1093, falling under 1.1050 before returning to 1.1062 by the end of the day; the current level not being optimal for UK consumers who are buying Euros.  The GBP/USD exchange rate also followed a similar pattern, opening at 1.6076, falling to just under 1.5980 in the middle of the day, but gaining through the afternoon to finish the day at 1.6065. The only economic figure of note from the UK yesterday was the slightly positive news that house prices showed a slight increase annually, from -1.2% to -1.1% according to a survey by Nationwide.

The economic docket today has already seen the release of the only significant figure from the UK. PMI Manufacturing for June fell; from 52.1 to 51.3, totally against market forecasts for a rise to 52.3. A slow down in manufacturing isn’t a positive sign for the sector, and could contribute to a gradually worsening picture of the UK economy as a whole.

The Euro fell slightly against the Pound, but traded higher against the US Dollar. The EUR/USD rate pushed up from the morning’s level of 1.4489 up to 1.4523 throughout the day; positive news for consumers in Euro-denominated countries who are buying Dollars. The economic docket hardly supported a positive push for the currency, with German retail sales falling drastically, both month-on-month and annually. The German unemployment rate held steady at 7.00%, and Euro-zone CPI figures showed no improvement in the annual inflation rate, holding firm at 2.7%.

Today’s European docket is expected to see Euro-zone PMI manufacturing to show no change and record a level of 52.0. Also, the Euro-zone unemployment rate is also expected by the currency exchange market to report no change, at an overall rate of 9.9%.

The Dollar finished the day weaker against the Euro, but slightly better against the Pound, as well as having a huge rise against sterling during the middle of the trading day. The US economic docket produced a lot of positive news yesterday. Chicago PMI figures showed a rapid rise in the level, from 56.6 up to 61.1. Initial jobless claims fell, along with continuing claims; showing that the labour market in the US is improving; however, at a slower pace than the market had forecast.

Today will see the release of the potentially market-moving University of Michigan confidence survey. The figure is expected to show a marked upturn, which could be beneficial for the Dollar. The survey is widely recognised within the market as good early indicator of any economic upturn or downturn. The afternoon will also see the release of ISM manufacturing and ISM prices paid figures, which are forecast to show a slight drop; but with the highly-anticipated University of Michigan figures set to dominate any movement, the ISM figures may well not have a major say on the direction of the Dollar.

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