Foreign Exchange Daily Market Update 05/07/11

There wasn’t a huge amount of movement in the foreign exchange market yesterday, owing to the US holiday for the 4th of July celebrations. The Pound finished the day slightly lower against the Euro and the US Dollar; the GBP/EUR rate falling from the morning’s open at 1.1098 to 1.1076 by the close, and the GBP/USD rate dropping slightly from 1.6126 at the open, to 1.6092 at the end of the UK business day. The current exchange rates are almost at 2 week lows for both currency pairs, not the optimum time for buying Euros or buying Dollars. The economic docket from the UK yesterday showed a contraction in PMI construction for June, from 54.0 down to 53.8.

Today’s economic data from the UK is minimal, with PMI services figures for June reporting. The market has forecast a slight drop in the index figure, from the previous month’s level of 53.8, down to 53.5. While this outcome would not be beneficial for the UK economic outlook, it is unlikely to force major moves on the currency exchange market by itself. Update: The figure released at 09:30 actually saw an increase in the figure, to 53.9, reversing 3 months of decline, and the Pound saw a sharp appreciation following the release.

The Euro regained slightly against the Pound, and moved a touch lower against the US Dollar yesterday. The EUR/USD rate fell from 1.4534 down to 1.4527, a minimal movement considering the market patterns of the last few weeks; but not surprising considering the market had considerably less trading volume throughout the day due to the US holiday. The only data of note from Europe yesterday was Euro-zone PPI figures, which showed a downturn in the annual level, from 6.7% down to 6.2%.

Today will see Europe release the overall Euro-zone retail sales figures, which are expected to show a drop, from 0.8% down to 0.6%, not a positive sign for the retail sector, and also a negative nod towards consumer sentiment, as it shows the European public are not spending their money on the high-street. German PMI services figures have already been released this morning, and showed a drop, from 58.3 falling down to 56.7. Later this morning we will see the release of combined Euro-zone PMI composite figures, which the market has forecast to hold steady, at the previous reading of 53.6%.

The US Dollar made hardly any moves on the foreign exchange market owing to the 4th of July holiday, and consequently there was no economic data released yesterday.

Today will see the release of US factory orders, which the market is expecting to see a sharp upturn, from the previous month’s level of -1.2% to record a positive level of 1.0%,, which could be beneficial for the currency.

Mike Hood
KBRFX