Daily Foreign Exchange Market Update 16/11/2011

Wed, November 16, 2011

The Pound closed out yesterday lower against both the US Dollar and the Euro in the foreign exchange market. The GBP/EUR exchange rate which opened at 1.1704 finished the day down at 1.1690, with the GBP/USD exchange rate also falling throughout the day from the mornings open at 1.5890 down to 1.5823 by the end of the UK business day. There was some welcome news in terms of inflation form the UK yesterday, with the headline CPI rate falling annually from 5.2% to 5.0%, and month-on-month from 0.6% to 0.1%. The core inflation rate though, rose annually from 3.3% to 3.4%, which could weigh on policymakers at the Bank of England.

This morning has already seen the release of a number of figures form the UK. Jobless claims for the month of October fell from 13,400 to 5,300, with the claimant count rate holding at 5.0%. The ILO unemployment rate for the 3 months to September rose though, to 8.3%, up from 8.1%. Also crossing the wires was the latest inflation report from the Bank of England; the key highlights being the central bank cutting its growth forecast for 2012, indicating that growth is likely to be as low as 1%. In terms of price-growth, the bank expects inflation to carry on falling throughout the year.

The Euro did make a small gain against the Pound, but lost ground against the US Dollar in the currency exchange market yesterday. The EUR/USD exchange arte fell from 1.3557 at the morning’s open, to trade at 1.3533 by the market close. There were disappointing figures released from Europe yesterday, with German 3^rd quarter GDP showing an annual slowdown from 3.0% to 2.5% (n.s.a figure) and from 2.9% to 2.6% (w.d.a figure), but quarterly there was a small improvement in growth, from 0.3% to 0.5%. Euro-zone GDP fell in the 3^rd quarter from 1.6% to 1.4% annually, but held at 0.2% quarterly. Euro-zone and German ZEW economic sentiment numbers were hugely disappointing, both showing sharp drops for the month of November, from -51.2 to -59.1, and from -48.3 to -55.2 respectively.

Euro-zone CPI (inflation) figures released this morning showed that inflation held steady at 3.0% annually, with core inflation staying at 1.6%, but price-growth fell month-on-month from 0.8% to 0.3%; directly in line with the market forecast.

The US Dollar finished the day having gained against both the Pound and the Euro. With constant shifts in risk sentiment across the market, the Dollar has been benefitting hugely. The currency showed gains despite disappointing economic data released yesterday that showed advance retail sales falling for the month of October, from 1.1% to 0.5%.

This afternoon will see the US release its latest CPI (inflation) figures, with the market forecast for inflation to have fallen slightly annually, which may be welcomed by consumers whoa re being affected bu tightening credit conditions, and a weak labour market.

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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