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Daily Foreign Exchange Market Update 24/10/2011

Mon, October 24, 2011

The Pound closed out last week higher against both the Euro and the US Dollar in the foreign exchange market. The GBP/EUR exchange rate picked up across the course of the week, from Monday’s open at 1.1384 to trade up at 1.1489 by the close of the UK business day on Friday. The GBP/USD exchange rate also followed a similar pattern, with the rate opening on Monday at 1.5814, and closing on Friday up at 1.5942. This was despite a worrying inflation outlook from the UK, with the latest CPI figures released showing that the annual rate of price-growth rose to 5.2% from 4.9%, way above the Bank of England’s 2.0% target. The main market focus for the UK though was on the release of the Bank of England’s minutes from its last policy meeting; with the minutes showing that policy-makers voted unanimously (9-0) to inject a further £75billion into the economy over the coming months, and also discussed the possibility of the amount being as much as £100billion. The central bank was also united in its decision to keep interest rates at a record-low of 0.5%, despite inflation being at record levels; the latest figures showing price-growth standing at 5.2%. Governor Mervyn King warned that Britain was in the grip of the world’s worst ever financial crisis, and that the British economy would stall without the combination of further quantitative easing and ‘ultra-low’ interest rates. Despite UK government cutbacks, public sector net borrowing figures for September released last week showed an increase, from the previous month’s level of £10.9billion to £11.4billion. Public finance figures also showed an increase in the amount of money financed to the UK government, from £11.8billion to £19.9billion.

The week ahead will be much lighter in terms of economic data for the UK. Tuesday will see the release of the latest BBA loans for house purchase figures, with the market forecast for an increase in the figure for September. Friday morning could well see the main data release of the day affect the Pound’s standing in the market, with the release of GfK consumer confidence numbers for October released in the early hours. The market expectation is for no change in the index, but with increasing inflation, and a worsening jobs market in the UK, there is potential for a downturn in the figure.

The Euro finished last week lower against the Pound and the US Dollar in the currency exchange market. The currency has been coming under fierce pressure as EU leaders are still trying to reach a solution for the debt issues across the region, with a number of market participants seeing potential ongoing problems for the Euro-zone even if a solution is agreed upon; with European banks needing to strengthen their balance sheets, and the possible involvement of the ECB being brought into question. The EUR/USD exchange rate fell across the course of the week, from Monday’s open at 1.3890, down to 1.3659 by the close of the UK business day on Friday. Economic data released form Europe last week was pretty negative, with Euro-zone consumer confidence falling once again for October; down to -19.9 from -19.1, and also ZEW economic sentiment figures showing a decline from -43.3 to -48.3 for the same period.  

This week will see some high-level market events, with Tuesday’s release of German GfK consumer confidence numbers, as well as Thursday’s German CPI (inflation) figures, and the latest Euro-zone business climate survey. The main market focus though is more than likely to be Wednesday’s market events, which will see the ECB release the results of a bank lending survey, and will also see EU leaders meeting at a debt summit, to try and come to agreement on an ongoing plan top try and restore some market credibility and financial stability to the region. The Euro could face even more pressure if there is no sign of a positive progression from this summit, with the market primed to punish any lack of tangible solution.

The US Dollar certainly benefitted from the debt woes in Europe last week by gaining against the single-currency across the week. The US Dollar however lost ground against the Pound, trading nearly a cent and a half lower against the Pound from Monday through to Friday. Data released from the US was fairly mixed, with CPI (inflation) rising annually in September, from 3.8% to 3.9%. Producer prices though held firm at 2.5% for September. The release of the Federal Reserve’s beige book economic survey showed a mixed outlook for the nation; with overall economic activity continuing to grow in September, albeit slowly, but with businesses expecting this to be ‘modest’ over the coming months.

There will be plenty of economic data crossing the wires form the US this week. Tuesday will see headline US consumer confidence figures released, with the market forecast to see an increase in positivity. Wednesday will see the release of durable goods orders figures for September; which are expected to show a sharp downturn. Thursday will be data-heavy for the US with 3rd quarter GDP figures, pending home sales and personal consumption numbers crossing the wires. The week will round off with Friday’s release of personal income and spending figures along with October’s University of Michigan confidence index, which is projected to show an increase for the month.

This Daily Market Update is brought to you by The Market Team @ KBRFXExchange Rate, Currency Conversion & Foreign Currency Transfer specialists.

Data Releases

Day Time Currency Event
MON 08:00 EUR EUR French Purchasing Manager Index Manufacturing
MON 08:00 EUR EUR French Purchasing Manager Index Services
MON 08:30 EUR EUR German Purchasing Manager Index Manufacturing
MON 08:30 EUR EUR German Purchasing Manager Index Services
MON 09:00 EUR EUR Euro-Zone Purchasing Manager Index Composite
MON 09:00 EUR EUR Euro-Zone Purchasing Manager Index Manufacturing
MON 09:00 EUR EUR Euro-Zone Purchasing Manager Index Services
MON 10:00 EUR EUR Euro-Zone Industrial New Orders (YoY)
MON 10:00 EUR EUR Euro-Zone Industrial New Orders s.a. (MoM)
MON 13:30 USD USD Chicago Fed Nat Activity Index

Foreign Exchange Rates

GBP/USD 1.5924
GBP/EUR 1.1511
EUR/USD 1.3830
GBP/JPY 121.06
GBP/CHF 1.4123
GBP/AUD 1.5347
GBP/CAD 1.6025
GBP/NZD 1.9802
GBP/SGD 2.0230
GBP/HKD 12.3856
GBP/CZK 28.653
GBP/PLN 5.0319
GBP/SEK 10.4862
GBP/DKK 8.5674
GBP/NOK 8.8623
GBP/THB 49.15
GBP/ZAR 12.8178

*These are indicative rates only, based on interbank prices at the time of writing. For exact rates please contact our dealing team

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