Foreign Exchange Daily Market Update 28/06/11

The Pound closed lower against the Euro, but higher against the US Dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate fell from 1.1270 to 1.1179 through the course of the day, putting pressure on UK consumers who are buying Euros. There was a welcome boost for people buying Dollars though, as the rate moved up from the morning’s low of 1.5930, to break the 1.60 barrier, before falling back slightly to 1.5975 by the end of the day.

There were no economic data releases from the UK yesterday to affect the movement of the currency. Today however will see the release of the final reading of 1st quarter UK GDP. With the quarterly growth rate expected to be confirmed at a level of 0.50% and annually at 1.8%, it is not an entirely impressive outlook for the UK economy, but better than any signs of a drop in growth, which would indicate an economic slowdown. Final figures for total 1st quarter business investment are also set for release, with the market forecasting no change from the previous reading of 3.2%. One figure that may give a positive boost to the Pound though is the UK’s current account balance reading for the 1st quarter; which is expected to see a reduction in the deficit from -10.5billion pounds to -4.7 billion pounds.

The Euro continued to find strength against the Pound and the US Dollar yesterday. The EUR/USD rate closed at 1.4279, a fair movement up from the morning’s level of 1.4134. The only low-level economic data to be released from Europe yesterday were figures showing that Italian hourly wages dropped slightly month-on-month, but held steady annually. The market was not really pushed by this news, as it doesn’t have any real bearing on the overall economic outlook for the Euro-zone.

Today has already seen the release of German GfK consumer confidence for July, which saw an upward movement in the reading, suggesting that sentiment across German society in regards to the economic outlook and their own personal spending is improving. There are a few figures of small economic importance to be released throughout the rest of the day, with Italian producer prices and French total jobseekers claims set for release. These figures though are likely to have little to no impact on the currency exchange market.

The Dollar weakened against the Pound and the Euro yesterday, and the economic docket did little to halt the slide. Figures released yesterday showed that personal income in the US has stagnated, at a level of 0.3%, while personal spending has dropped, from 0.3% to 0.00%, suggesting that wages are not increasing across the country, and regardless of this, consumers are holding onto their money; which is not good for the economy.

The market will focus on US consumer confidence figures that will be released today. The market has forecast a slight increase in consumer confidence, which would be positive for the US currency, as it would indicate a perceived improvement in business conditions, employment and personal spending.

Mike Hood
KBRFX