Daily Foreign Exchange Market Update

Wed, July 06, 2011

The Pound managed to gain some ground against the Euro and the US Dollar in the foreign exchange market yesterday. The GBP/EUR rate opened at 1.1066 and pushed up throughout the day to trade at 1.1115 near the close. The GBP/USD rate also followed a similar pattern, moving up from the morning’s levels of 1.6021, to 1.6081 at the end of the UK business day. The jump in rates was good news for people who are buying Euro or buying Dollars. There was positive economic news from the UK, which may well have contributed to the rise, with PMI services figures showing the first rise in 3 months; the figure reporting an upturn in activity from 53.8 to 53.9.

Today has already seen some positive news from the UK’s economic docket, with Halifax house prices showing an increase of 1.2% for June; which is the biggest rise since October. Low interest rates combined with more people in employment has helped the housing market, and experts predict that if rates are kept low, we will continue to see improvement over the coming months, which is good news for the overall economic picture in the UK.

The Euro lost ground against the Pound and the US dollar yesterday. The EUR/USD rate fell from the open at 1.4478 to trade below 1.4406 at the end of the day. The economic news from Europe wasn’t positive; with the Euro-zone PMI composite figure showing a sharp decline, falling from 53.6 down to 53.3. Also, Euro-zone retail sales fell drastically, with the annual rate dropping to -1.9 from 0.8%, and the month-on-month level also slowing rapidly, the figure showing a drop from 0.7% down to -1.1%.

This morning will see the release of German factory order figures for May, which are forecast to show a sharp downturn, in both the monthly and annual rate. For an economy that relies heavily on industry, this will not be a good outcome for the Euro, and the currency exchange market could react sharply.

The Dollar recovered some ground against the Euro, but not against the Pound throughout yesterday. US factory order figures did show a sharp, unexpected jump, from -0.9% the previous month up to 0.8%. This news did see the GBP/USD rate pull back from above 1.6115 on its release, to 1.6081 at the close of the day. Through the early hours of the morning the rate has continued to pull back, but this could also be due to a cut in Portugal’s credit rating, with speculative traders buying Dollars to protect their risk exposure.  

The US economic docket today will focus on ISM non-manufacturing figures, with the market forecast for a drop in levels, which would not be positive news for the currency.

Data Releases