Daily Foreign Exchange Market Update

Tue, August 23, 2011

The Pound lost some ground against the Euro and the US Dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate fell slightly from the mornings open at 1.1450, to trade just above 1.1440 by the end of the day. The GBP/USD exchange rate also dropped, from 1.6490 in the morning to 1.6447 by the days close. There were no significant pieces of economic data released from the UK yesterday; with movements on the currency market being based on risk sentiment and news from the world’s other major economies.

This morning we will see the release of July’s BBA loans for house purchase figures; with the market forecast for a slight increase in the index reading; which could help to restore some positive sentiment in the UK housing market; however, any sharp drop in the reading may prove to be damaging for the Pound, as the market will look to capitalise on any signs of weakness in the overall economy.

The Euro made a slight advance against the Pound; but fell against the US Dollar yesterday; the EUR/USD exchange rate slipping back from 1.4409 at the mornings open to trade at 1.4380 by the day’s close. Like the UK, there was no significant economic data released from Europe yesterday; leaving the currency open to speculation and market news from around the world.

Today has already seen a large amount of data released from the Euro-zone; with French PMI manufacturing showing a decline for August, from 50.5 down to 49.3; and services increasing from 54.2 to 56.1. German PMI figures showed no change in manufacturing activity; the index reading holding at 52.0, but services activity fell from 52.9 to 50.4. Euro-zone combined PMI figures showed a decline in both manufacturing and services, from 50.4 to 49.7, and from 51.6 to 51.5 respectively, but the composite figure held firm at 51.1. Later on today we will see the release of German and Euro-zone ZEW economic sentiment survey results, and also Euro-zone consumer confidence; with the currency poised to react to any surprises in the figures.

The US Dollar regained some ground against the Euro and the Pound in the currency exchange market yesterday. The currency was helped by a positive increase in the sole data release from the US yesterday; the Chicago Fed national activity index. The figure showed a pick-up in activity, from the previous months reading of -0.38 to -0.06 amid market forecast for a further drop. This may well have contributed to the dollar’s rise in the market.

The US economic docket today will focus on the housing market, with new home sales figures set for release. The market forecast is for a positive increase in sales; from 312,000 to 315,000, and the monthly growth level to jump from -1.0% to 1.0%. The Dollar will come under pressure this week, but positive news, particularly from weaker sectors of the economy such as housing, may have a positive effect on the currency.

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