Daily Foreign Exchange Market Update

Wed, August 03, 2011

The Pound fell slightly against the Euro and the US Dollar in the foreign exchange market yesterday. The GBP/EUR rate opened at 1.1477 and fell to 1.1445 by the day’s close. The GBP/USD exchange rate followed a similar pattern, falling from 1.6286 down to 1.6279. The only piece of economic data of any not released was PMI construction figures, which showed a slight drop in activity, from 53.6 to 53.5, but was better than the market forecast for a reading of 53.1.

This morning we have seen the release of PMI services figures, with the index showing a positive increase for the month of July, up from 53.9 to 55.4, but there are no other scheduled releases from the UK for the rest of the day.

The Euro made small gains against the Pound and the US Dollar; the EUR/USD rate moving up from the morning’s open at 1.4190 to trade at 1.4223 by the day’s close. The European economic docket yesterday showed that Euro-zone PPI fell annually, the growth slowing from 6.2% to 5.9%, but the month-on-month figure showed a positive increase, from -0.2% to 0.0% flat. The currency may still face pressure though, with the possibility that other member nations may need additional funding and debt re-structuring similar to Greece.

Today has seen some positive news from the Euro-zone, with retail sales showing a marked increase for the month of June, the annual level picking up from -2.3% to -0.4%, and monthly rising from -1.3% to 0.9%; however; the currency exchange market didn’t show any sharp appreciation towards the currency, as the main market focus is still on the US, and its debt ceiling agreement.

The US Dollar managed to pull back slightly against the Pound, but fell against the Euro yesterday, despite Congress passing a bill that enabled the nation to raise its debt ceiling, thereby preventing it defaulting on it’s debt repayments; a situation that could have sent shockwaves through the world markets. There is still an underlying issue though, with the bill containing a large amount of cuts that must be made in various sectors, and could end up being detrimental to overall economic growth across the US. The main economic data released from the US yesterday showed that personal income in June fell, from 0.2% to 0.1, with personal spending increasing slightly from 0.1% to 0.2%.

Today will see the release of ADP employment change figures, with the forecast for fewer jobs to be added than last month, around 100,000, down from 157,000, which would not be positive news for the US labour market. US factory orders figures will also be released, along with ISM non-manufacturing data, which should there be any sharp drops, could be detrimental for the US currency.

Data Releases