Daily Foreign Exchange Market Update

Fri, August 26, 2011

The Pound ended yesterday almost unchanged against the Euro, but lower against the US Dollar in the foreign exchange market. The GBP/EUR exchange rate which opened at 1.1326 had a small pick-up mid afternoon, but ended the day at 1.1327. The GBP/USD exchange rate fell from the mornings open at 1.6372 to 1.6284 by the days close. The economic data released from the UK yesterday was negative, with CBI reported sales figures for August showing a marked decline, from -5 to -14. The main reason that the market attributed the Pound’s weakness against the Dollar however was the expectation that the Federal reserve Chairman Ben Bernanke will be announcing further monetary stimulus in the US today, which will help to improve the economic outlook for the US.

This morning has seen the final reading of 2^nd quarter GDP from the UK. The result was unchanged from the previous reading with the annual growth rate showing 0.7% and the quarterly growth rate showing 0.2%. The currency market showed little reaction to the release, which was widely expected to be unchanged.

The Euro lost ground against the US Dollar following the increased positive sentiment towards the US, but the single-currency held firm against the Pound. The EUR/USD rate fell throughout the day, from 1.4454 down to 1.4374. There were no significant data releases from the Euro-zone yesterday to further affect movements on the currency exchange market. 

Today’s European economic docket is devoid of any data releases, leaving the currency open to risk sentiment, and news from the world’s other major economies.

The US Dollar made good gains across the board yesterday, with increased positivity towards the nation anticipating the addition of further monetary stimulus to the economy at Fed Chairman Bernanke’s speech at Jackson Hole this afternoon. Figures yesterday showed that the US labour market still remains a little unsteady though, with continuing claims falling for the month; from 3,721,000 to 3,641,000, but initial jobless claims increasing from 412,000 to 417,000.

This afternoon contains a lot of significant economic events for the US, with the potential to make big moves on the currency markets. Before Bernanke’s speech, we will see the final reading of 2^nd quarter GDP from the US, as well as the University of Michigan confidence survey results for August. Despite the Dollar showing a marked appreciation through most of this week, any disappointments in terms of economic growth of confidence could be damaging to the currency.

Data Releases