Foreign Exchange Daily Market Update 01/06/11

Tuesday saw the Pound lose ground against the Euro and the US Dollar as the economic docket for the UK remained devoid of figures for a second day. Looking ahead to today's figures, April's mortgage approvals are set to slip from 47,600 approvals in March to 47,000 while net lending secured on dwellings is expected to rise from £0.4 billion to £0.7 billion. May's Purchasing Manager's Index (PMI) for the manufacturing sector could weaken the Pound's standing. A lower reading than the expected 54.1 index figure will most likely drive the currency lower, whilst a better than expected outcome could lift the gloomy outlook and push the currency higher.

The Euro saw some support on Tuesday when talks of Greece receiving a second bailout reached the foreign exchange market. According to the Wall Street Journal, German Officials eased off the pressure on getting Greece to restructure its debt before securing additional funds. As part of the deal Greece will have to accept additional austerity measures to receive further funding from the International Monetary Fund (IMF) and the EU. Among other requirements Greece will have to extend its public sector pay freeze, make cuts in civil service benefits and limit the nation's capital expenditure. Since this is a significant hurdle to have jumped, in securing additional funds, the news pushed the Euro exchange rate to a high of 1.4414 against the US Dollar and to 1.1420 against the British Pound.

Today final revisions to the German and Euro-zone manufacturing PMI for May headline the European docket. The index reading for Germany is expected to remain unchanged at 58.2 and the Euro-zone's reading to hold at 54.8. Any surprise downward revisions could see the Euro lose some of the gains it made yesterday, whereas a better than expected reading will extend its advance.

Yesterday's price action was mixed with regards to the US Dollar. Despite economic figures disappointing market traders, the Dollar made gains against the British Pound with the currency pair hitting a low of 1.6423. Whilst against the Euro, the Dollar managed to regain some ground after the single currency rallied following the possibility of Greece receiving a second bailout. On the data front Consumer Confidence fell in May to 60.8, the lowest level to be seen in six months. The index fell from an upwardly revised 6.6 in April, missing estimates for sentiment to improve to 66.6. Further to this the Chicago Purchasing Manager Index fell further than expected, slipping from 67.6 to 56.6 to mark its lowest reading since November 2009.

Economic figures due out today look set to provide a weaker outlook for the US economy and as such could stoke a reversal in risk sentiment on the currency exchange market, which lead to an appreciation for the Dollar through safe haven trading. To start with the ADP Employment Change survey is expected to show that the number of employed fell from 179,000 to 178,000 in May. Later into the session May's ISM Manufacturing index is estimated to fall from 80.4 to 57.2, indicating that manufacturing activity is cooling but still showing signs of growth.