Foreign Exchange Daily Market Update 22/07/11

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The Pound gained significant ground against the US Dollar, but fell slightly against the Euro in the foreign exchange market yesterday. The GBP/USD rate shot up from 1.6163 at the morning’s open to trade up above 1.6300 by the end of the day. However, the GBP/EUR exchange rate fell, from 1.1348 down to 1.1336 at the UK close; with the market seeing some small positivity towards Europe’s resolution for the Greek debt crisis. Economic data from the UK yesterday showed that retail sales advanced rapidly for the month of June, with levels rising from -0.2% to 0.2%, nearly a half a percent growth from May. There was some negative news though, with public finance figures showing the UK government increased the amount of money it diverted to the public sector, from 11.3 billion pounds up to 21.0 billion pounds in June, and public sector net borrowing also increased, from 12.0 billion pounds up to 14.6 billion pounds for the same period.

There are no scheduled data releases from the UK today, so movements on the currency exchange market will be subject to key data and events from the world’s other major economies.

The Euro managed to regain some of the week’s previous losses yesterday, with EU ministers seemingly in agreement over a re-structuring of Greece’s debt to prevent the nation going into default. The EUR/USD rate shot up throughout the day, from 1.4240 to trade at 1.4382 by the end of the day. Aside from the Greek situation being appeased; albeit some experts predicting only temporarily, the economic data released form Europe yesterday was not positive. Figures showed that German PMI manufacturing fell for the month of July, along with Euro-zone PMI manufacturing, service, and the composite reading all falling drastically for the same period; reinforcing to the market that away from the main news stories, Europe is still struggling on a basic economic level.

This morning has already seen the release of German IFO figures for July; with the business climate reading falling from 114.5 to 112.9, and the current assessment figure also dropping from 123.3 to 121.4. The foreign exchange market showed little reaction though; with the currency possibly still being buoyed by the fact that Greece is no longer the most pressing issue for the region.

The US Dollar has continued to lose ground against the Euro and the Pound this past week; with the US facing the possibility of defaulting on debt repayments come August, and ratings agency Standard and Poor’s affirming the fact that they will cut the US credit’s rating should this situation happen. Congress need to come to some form of agreement to raise the US’s debt ceiling in the next 2 weeks to prevent them being unable to meet their obligations; and the currency is being deeply affected by this.

The same as the UK, there are no scheduled data releases from the US today, so the market will be open to movements based on sentiment, and any economic or political events that occur during the course of the day.

Mike Hood
KBRFX

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