Daily Foreign Exchange Market Update 23/11/2011

Wed, November 23, 2011

The Pound finished yesterday almost unchanged against the Euro and the US Dollar overall in the foreign exchange market. The GBP/EUR exchange rate which opened at 1.1578, closed the day out at 1.1577 following a choppy trading day. The GBP/USD exchange rate fell from the morning’s open at 1.5670 to trade at 1.5656 by the close of the UK business day, a marginal overall movement given the ranges of the past few weeks. Yesterday saw the release of public sector net borrowing figures, which showed that borrowing dropped month-on-month from £10.2billion to £3.4billion, and that public finances (the amount of money financed to the UK government) also fell from £20.3billion to £-0.6billion. This should be interpreted as good news for the UK, as the government look to reduce both spending and borrowing. There is a fear however that deep austerity measures could be detrimental to overall economic growth.

This morning will see the release of the minutes from the Bank of England’s last policy meeting. Whilst there was no change to either the base interest rate or the asset purchasing target at the last meeting, market participants will be eager to gauge some insight into expectations for inflation and growth over the coming months, and if the current debt situation in Europe is changing the view of policymakers.

The Euro closed out the day practically unchanged against the Pound, and slightly lower against the US Dollar in the currency exchange market. The EUR/USD exchange rate dropped from the morning’s open at 1.3533 to trade at 1.3522 by the close of the European trading session. There was increased pressure on the Euro yesterday, with the release of November’s Euro-zone consumer confidence numbers, which as predicted showed a decline; from -19.9 to -20.4.

This morning has seen some positive news, with the release of Euro-zone PMI services data, which showed an increase for the month of November, as did the composite number; but the manufacturing figure reported a slight drop overall. Later on this morning we will see the release of Euro-zone industrial new orders figures, which are expected to show a decline both annually and month-on-month.

The US Dollar made a small gain against the Pound and the Euro yesterday, but there was disappointment in the form of 3^rd quarter GDP figures, which showed that economic growth in the US was only at a level of 2.00% as opposed to market forecasts for a level closer to 2.50%. This was compounded by the release of the minutes from the Federal Reserve’s last policy meeting, with the overall feeling that policy-makers are primed for a 3^rd round of quantitative easing, as the FOMC is concerned by high unemployment, low growth, and also the potential fall-out from a European default.

Today will see durable goods orders for October cross the wires, with the market forecast fro a decline in the number. Also set for release is the University of Michigan’s confidence index for Novemebr, which is expected to show a small increase, which could benefit the US Dollar in the 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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