Daily Foreign Exchange Market Update 11/11/2011

Fri, November 11, 2011

The Pound finished yesterday marginally lower against the Euro, and almost unchanged against the US Dollar in the foreign exchange market. The GBP/EUR exchange rate showed some choppy movements throughout the day, and ended the day at 1.1723, a touch lower than the morning’s open at 1.1734. The GBP/USD exchange rate which opened at 1.5925, finished the day practically unchanged at 1.5929 by the close of the UK business day. The main risk event from the UK yesterday was the Bank of England’s interest-rate decision; but as expected there was no change to either the base interest rate or the asset purchase target. Market participants will have to wait for the release of the meeting’s minutes to gauge any firm direction in regards to policy and outlook from the central bank.

Already released this morning from the UK were PPI figures for October; which showed that input fell sharply annually, from 17.7% down to 14.1%, with output also dropping from 6.3% to 5.7% over the same period.

The Euro did manage to pull back slightly against the US Dollar and the Pound in the currency exchange market yesterday. The appointment of a new Greek Prime Minister in Lucas Papademos has gone some way to appease the market, as his sole mandate seems to be approving an EU bailout to secure vital funding, and in his words to ‘create unity’ in the Euro-zone. The EUR/USD exchange rate did push up slightly from 1.3572 at the morning’s open to trade up at 1.3586 by the market close. Aside from the Greek issue, the ECB released it’s latest monthly report yesterday, which showed that the central bank has slashed it’s growth forecasts for next year from 1.8% to a paltry 0.5%, leading European Commissioner Ollie Rehn to warn of the possibility that the Euro-zone is set to re-enter recession.

There is no significant economic data set for release from the Euro-zone today, but there are likely to be plenty of news stories in regards to Greece, and also Italy; where current PM Silvio Berlusconi is expected to step down over the weekend, which could affect the Euro currency within the market.

The US Dollar at various times did make good gains in the market yesterday, mainly on risk aversion as the European market seemed particularly turbulent. The Dollar did finish the day slightly lower against the Euro though, but there was some positive news with the fact that the US’s trade balance showed a reduction in the negative deficit for the month of September. The figures showed that the negative trade balance narrowed from -$44.9billion to -$43.1billion across the month.

Today’s US economic docket will focus on this afternoon’s University of Michigan confidence index reading. The market forecast is for a small increase in the index, and with the reading considered a good early indicator of economic up or downturn, a positive reading could well benefit the Dollar.

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

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