Daily Foreign Exchange Market Update

Wed, August 24, 2011

The Pound made a small gain against the Euro, but lost ground against the US Dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate picked up from 1.1436 at the mornings open to trade at 1.1445 by the market close, while the GBP/USD rate fell from 1.6543 to 1.6506 throughout the day. The sole piece of economic data released from the UK yesterday was positive, with the BBA loans for house purchase figure showing a marked increase for July; up from 32,123 to 33,417, way above the market forecast for levels closer to 31,750. 

There is no scheduled data for release from the UK today, so the currency will be open to any shifts in sentiment, and data from the world’s other major economies.

The Euro lost ground against both the Pound and the US Dollar yesterday; the EUR/USD rate falling from 1.4465 in the morning to 1.4421 by the end of the day. There was quite a lot of data released from Europe yesterday; with French, German, and Euro-zone PMI showing a mainly negative picture overall, for the manufacturing and services sectors. The ZEW economic sentiment surveys for Germany and the Euro-zone also showed disappointing drops, from -15.1 to -37.6 and from -7.0 to -40.0 respectively. Euro-zone consumer confidence also fell for the month of August, from -11.2 to -16.6, which put the currency under a lot of pressure.

This morning we have already a seen a further dent to sentiment in Europe, with the release of German IFO figures for business climate, current assessment, and expectations; with all three figures showing a marked drop; the reading for expectations (for the German economy in the coming months) falling to it’s lowest level for nearly a year.

The US Dollar regained some ground against the Pound and the Euro in the currency exchange market yesterday. Data released from the US wasn’t positive, with new home sales figures for July showing a sharp decline, from 312,000 sales to 298,000 sales.

Today will see the release of durable goods orders for July, and monthly and quarterly house price index readings. The market is forecasting a large increase in durable goods orders, which could well benefit the dollar, and should the housing market figures display any increased positivity; this too could hep boost the dollar.

The Pound has also been maintaining good levels against the Aussie Dollar, with the GBP/AUD rate picking up overnight from 1.5652 to 1.5743; which is a welcome boost for expats looking to move funds from the UK across to Australia, who have been suffering with low rates for many months.

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