Daily Foreign Exchange Market Update

Thu, August 25, 2011

The Pound started to fall against both the Euro and the US Dollar in the foreign exchange market throughout yesterday. The GBP/EUR exchange rate fell from the mornings open at 1.1439 down to 1.1369 by the end of the day; with the GBP/USD exchange rate also slipping from 1.6476 down to 1.6368 by the days close. The Pound is coming under pressure with the market speculating that the Bank of England may expand its asset purchase program in the near-term, in the face of a slowing recovery; to prevent the nation falling back into recession.

Overnight we have seen the release of Nationwide consumer confidence figures; with the level falling slightly from 51 to 49, but coming in above expectations for a deeper slide to 45. This morning will see the release of CBI reported sales figures for August, with the market forecast for a drop in sales, the index expected to fall from -5 to -10, which could put the Pound under further pressure.

The Euro started to reverse some of its earlier losses against the Pound yesterday, and finished the trading day almost unchanged against the US Dollar. Despite a disappointing economic docket, the EUR/USD exchange rate ended the day at 1.4395, almost exactly as the market open at 1.4393. A negative outlook for Germany was reinforced yesterday, with IFO surveys showing a drop in business climate, current assessment, and expectation readings for the month of August. Euro-zone industrial new orders also fell; annually from 13.8% down to 11.1% and month-on-month from 3.6% to -0.7%.

This morning has seen the release of German GfK consumer confidence figures, with unsurprisingly a small drop in the reading, from 5.3 to 5.2, but the currency has remained largely unaffected. Aside from French labour market figures later this afternoon; which should have little to no effect on the currency markets; there are no significant pieces of economic data scheduled for release from Europe today.

The US Dollar regained some ground against the Pound yesterday, but showed little overall gain against the Euro despite making a small surge during the mid-afternoon. There was positive news from the US yesterday, with durable goods orders surprisingly rising for the month of July; from -1.9% up to 4.0%, and the house price index showing a positive gain, from 0.4% to 0.9%.

Today will see the release of initial jobless claims, and also continuing claims figures from the US. Despite both figures being classed as fairly low-level, any rapid shifts to either the up or downside, would have the potential to have a knock-on effect to the currency exchange markets.

Data Releases