Daily Foreign Exchange Market Update

Tue, September 13, 2011

The Pound remained relatively unchanged against the US Dollar during yesterday's trading session leaving conditions less than ideal for buying Dollars. The foreign exchange market bared witness to some choppy trading as the Pound slipped to an early morning low of 1.5790, against its US counterpart, before climbing to its afternoon high of 1.5886. As the European market drew to a close, the GBP/USD exchange rate fell to the day's low of 1.5771 before climbing back to 1.5853 by the close of the US market. Despite a lack of meaningful economic data from both Britain and the Continent, the Pound lost ground against the Euro to see the GBP/EUR exchange rate fall from its high of 1.1714 to 1.1574, however the market was still favourable for buying Euros.

This Tuesday the UK is scheduled to see August's Consumer Price Index (CPI) announced with expectations calling for an annual increase from 4.4% to 4.5%. The predicted outcome could potentially bolster the Pound's trading power against the other currencies. Along side the CPI's release, July's visible trade balance figures are expected to show that the UK's trade deficit has shrunk since June. Just like with the release of the CPI reading, the Pound could gain strength if trade deficit narrows in line with expectations.

The Euro gained ground against both the British Pound and the US Dollar during Monday's session, with currency exchange market seeing the EUR/USD exchange rate picking up from 1.3554 to a high of 1.3694. The Euro's reversal could be attributed to ECB President Jean-Claude Trichet's comments following the Global Economy Meeting held in Basel, Switzerland. The European Central Bank (ECB) President gave a show of strength when he announced that European central banks were "united" in guarding against inflationary and deflationary risks. He also stated that all Europeans "expect the Greek government to fully deliver on its commitments," and added that there is "superior interest" in observing that satisfactory results take place in Greece.

So far this morning, the Euro retraced some of its gains against the Pound to see the GBP/EUR exchange rate rise above 1.16, while against the US Dollar the exchange rate slipped to 1.3597. The Euros decline could be attributed to the better than expected growth rate in the French CPI reading for August. Normally higher CPI readings would be positive for the currency but considering that the ECB is has indicated that it may look to slash interest rates, price growth would only be a hindrance to the region.

With little economic data out from the US on Monday, the Dollar remained unchanged against the Pound, although the currency pair did test the lower ranges twice on Monday, but this was short lived as the exchange rate corrected itself to levels above 1.58. The same could not be said for the Dollar's performance against the Euro which overpowered the Dollar to see the Euro rate make gains.

Looking ahead the most significant piece of data to come out from the US will be August's Monthly Budget Statement which economists forecast to increase from a budget deficit of $90.5 billion to $132 billion. The outcome will likely have a negative impact on the US Dollar when the data is released at 19:00 BST.

This Daily Market Update is brought to you by The Market Team @ KBRFX – Exchange Rates & Foreign Currency Transfer specialists.

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