Daily Foreign Exchange Market Update

Thu, September 01, 2011

The Pound made a small gain against the Euro but fell against the US Dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate picked up a touch from the mornings open at 1.1281 to trade at 1.1289 by the days close; whilst the GBP/USD exchange rate fell throughout the day from 1.6316 to 1.6260. There were ne significant pieces of economic data released from the UK yesterday, but with some high-level market data from Europe and the US there are some plausible explanations for the shifts in sentiment.

This morning has already seen the UK release nationwide house price figures for August, with the result being no change in the overall price growth, the rate remaining at -0.4% amid a market forecast for an improvement to around +0.4%. Also already having crossed the wires is Augusts’ PMI manufacturing figures from the UK; with the result showing a drop from the previous month’s reading of 49.4 down to 49.0. This didn’t really affect the currency exchange market, with the result being exactly in line with the market forecast.

The Euro fell against both the Pound and the US Dollar yesterday, amid quite a mixed picture in terms of economic data. The release of German retail sales figures showed that the annual rate picked up slightly from -2.1% to -1.6%, but monthly it fell dramatically from 4.5% to 0.0%. There was a slight improvement in the German unemployment change figures, with the figure improving slightly from -10,000 jobs to -8,000 jobs. The overall German unemployment rate was unaffected though, holding steady at 7.0%. Euro-zone unemployment was unchanged from the previous month at 10.0%, and there was also no change in the Euro-Zone CPI estimate for August, with inflation predicted to remain at 2.5%.

There has already been plenty of data released from Europe this morning, with 2^nd quarter German GDP showing no change in the previous reading, the n.s.a growth rate level at 2.8%, and the w.d.a figure at 2.7%. German PMI manufacturing for August fell, from 52.0 to 50.9, with the Euro-zone PMI manufacturing index also falling, from 49.7 to 49.0. The currency has weakened slightly against the Pound with this news, with the GBP/EUR rate pulling back to higher levels above 1.13 from yesterday’s close at 1.1289.

The US Dollar continued to strengthen across the board yesterday, the EUR/USD exchange rate coming down from 1.4462 at the mornings open, to trade at 1.4402 by the days close. There was a mixed picture in terms of economic news though, with the ADP employment change showing a disappointing drop in the number of new jobs, down from the previous month’s level of 109,000 to only 91,000 in August. US factory orders however showed an impressive gain, picking up to 2.4% from -0.8% for July, with the result smashing the market forecast for a reading of 2.0%. This has boosted the Dollar, amidst heavy speculation that the Federal Reserve will be looking to implement further monetary stimulus to boost the US economy.

This afternoon will see the release of ISM manufacturing and ISM prices paid figures from the US. The market forecast is for a slight drop in the level of both readings, but it is unlikely to heavily affect the currency.

Data Releases