The Pound saw some choppy trading against the Euro yesterday and suffered heavy loses against the US Dollar. The GBP/EUR rate opened the trading day at 1.1410 where it then fell to a low of 1.1354, before finally rising to its peak of 1.1460 when the European market closed. The GBP/USD rate did not manage to make a similar recovery, instead following its open at 1.6432 the exchange rate began to drop and eventually closed the day out at a low of 1.6237. Part of the Pound's decline can be attributed to a disappointing reading for July's manufacturing Purchasing Manager's Index (PMI) which fell to 49.1 down from 51.4 to indicate a contraction in the UK's manufacturing sector.
Today the foreign exchange market will see the release of July's PMI for the construction sector with forecast's calling for the index to slip from 53.4 to 53.1. This outcome could push the Pound lower against both the Dollar and the Euro as construction growth slows. However, given yesterday's poor manufacturing PMI, its possible that an even greater drop in activity could be reported, resulting in a steeper decline in the exchange rate.
Yesterday, currency exchange traders saw the EUR/USD rate drop after the currency pair peaked at 1.4453 by mid-morning, at that point the rate fell sharply over the early afternoon to hit a low of 1.4190. On the docket July's manufacturing PMI's for France, Germany and the Euro-zone were released. The French PMI came in above expectations at 50.5, while the Euro-zone reading came in-line with market forecasts at 50.4, however Germany's PMI was announced marginally short of forecasts at 52.0 instead of 52.1.
Looking ahead, the Euro-zone Producer Price Index is expected to show that factory price growth had slowed in June to 5.9% compared to the same time last year. The outcome will mean inflationary pressures will have eased and the ECB will not have to consider carrying out another interest rate hike at the next policy meeting. This can be considered good for the Euro as it allows weaker Euro-zone peripheries a chance to grow.
The US Dollar finally recovered some lost ground against both the Euro and the British Pound. The Dollar regained its strength when confidence was restored in the US economy following Congress's agreement to raise the debt ceiling, however the Senate still needs to vote on the proposal before it's put into effect. On the data front the ISM Manufacturing index fell below expectations in July with a reading of 50.9 down from 55.3 to show that manufacturing growth has slowed. The Prices Paid sub-index also fell over the same period form 68.0 to 59.0, while Construction Spending in June picked up by 0.2% to surprise forecasters.
Headlining the US docket today will be the Senate's vote on the Debt Limit Bill that was passed by Congress yesterday. The bill seeks to raise the US debt ceiling by $900 billion while cutting the federal budget by $917 billion over the next 10 years. Should the Bill be passed by the Senate, then the US could receive a boost in confidence by the global market which in turn could see the Dollar appreciate. However before the vote, the docket is scheduled to see personal income growth slow in June from 0.3% to 0.2%, while core personal consumption for the same period will match this decline. The forecasted outcome could weigh on the Dollar ahead of the Senate's vote.
Today the foreign exchange market will see the release of July's PMI for the construction sector with forecast's calling for the index to slip from 53.4 to 53.1. This outcome could push the Pound lower against both the Dollar and the Euro as construction growth slows. However, given yesterday's poor manufacturing PMI, its possible that an even greater drop in activity could be reported, resulting in a steeper decline in the exchange rate.
Yesterday, currency exchange traders saw the EUR/USD rate drop after the currency pair peaked at 1.4453 by mid-morning, at that point the rate fell sharply over the early afternoon to hit a low of 1.4190. On the docket July's manufacturing PMI's for France, Germany and the Euro-zone were released. The French PMI came in above expectations at 50.5, while the Euro-zone reading came in-line with market forecasts at 50.4, however Germany's PMI was announced marginally short of forecasts at 52.0 instead of 52.1.
Looking ahead, the Euro-zone Producer Price Index is expected to show that factory price growth had slowed in June to 5.9% compared to the same time last year. The outcome will mean inflationary pressures will have eased and the ECB will not have to consider carrying out another interest rate hike at the next policy meeting. This can be considered good for the Euro as it allows weaker Euro-zone peripheries a chance to grow.
The US Dollar finally recovered some lost ground against both the Euro and the British Pound. The Dollar regained its strength when confidence was restored in the US economy following Congress's agreement to raise the debt ceiling, however the Senate still needs to vote on the proposal before it's put into effect. On the data front the ISM Manufacturing index fell below expectations in July with a reading of 50.9 down from 55.3 to show that manufacturing growth has slowed. The Prices Paid sub-index also fell over the same period form 68.0 to 59.0, while Construction Spending in June picked up by 0.2% to surprise forecasters.
Headlining the US docket today will be the Senate's vote on the Debt Limit Bill that was passed by Congress yesterday. The bill seeks to raise the US debt ceiling by $900 billion while cutting the federal budget by $917 billion over the next 10 years. Should the Bill be passed by the Senate, then the US could receive a boost in confidence by the global market which in turn could see the Dollar appreciate. However before the vote, the docket is scheduled to see personal income growth slow in June from 0.3% to 0.2%, while core personal consumption for the same period will match this decline. The forecasted outcome could weigh on the Dollar ahead of the Senate's vote.
Sam Kennison
KBRFX
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