Daily Foreign Exchange Market Update

Tue, August 30, 2011

The Pound held very narrow trading ranges against both the Euro and the US Dollar in the foreign exchange market yesterday; as would be expected with a bank-holiday in the UK. With no data at all released from the UK, the GBP/EUR exchange rate ended the day at 1.1298, and the GBP/USD exchange rate was at 1.6395. The overwhelming movement for the Pound across last week was down, against both the Euro and the US Dollar, with a combination of poor economic data, and lukewarm growth figures seeing no increased positivity towards the currency.

This morning has seen the release of some positive data from the UK, with mortgage approvals for July showing a marked improvement from 48,500 to 49,200. The rest of the week ahead holds only a small amount of influential UK economic data, with consumer confidence, house prices, and PMI manufacturing figures the only highlights in a week that will be dominated by high-level data from Europe and the US.

The Euro hardly moved against the other major currencies in the market yesterday, despite the release of CPI (inflation) data, which showed that price-growth in Germany is slowing, the annual inflation rate falling from 2.4% to 2.3%, and monthly from 0.4% to -0.1%. The EUR/USD exchange rate was hardly affected, as the mornings open at 1.4529 was practically unchanged throughout the day; the exchange rate trading at 1.4511 by the market close.

This morning has seen the release of Euro-zone consumer confidence for August, with the reading of -16.5; a touch up from the previous months’ level of -16.6, but still near the lowest levels since 2008; not being a positive result for Europe, and in turn it’s currency. The rest of the week is data-heavy from Europe, particularly it’s strongest economy, with the German labour market set to come under scrutiny tomorrow, and the focus to shift to GDP and PMI later in the week, with Euro-zone PPI figures poised to move the market should there be any surprises on Friday.

The US Dollar recovered well against the Pound, but overall lost ground against the Euro despite making some good gains at various points during the week. Figures released yesterday from the US showed that both personal income and personal spending increased for the month of July, from 0.2% to 0.3%, and -0.1% to 0.8% respectively; which is a good indication towards overall economic growth, and increased consumer confidence.

This will be tested today with the release of US consumer confidence figures for August, and the market will also be looking closely at the minutes from the Federal Reserve’s last policy meeting which will be released this evening. It is widely accepted that the Federal Reserve will not be affecting the base rate until well into next year at the earliest, but there could be some indication into the central bank’s view on further quantitative easing, with the possibility of further stimulus to try an improve growth levels as the US economy is still in a fairly fragile state.

Data Releases