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The Pound continued with another day of losses against the Euro and the US Dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate fell from the mornings open at 1.1372 to 1.1343 by the end of the day, the Pound not helped by overall disappointing economic figures which showed that industrial production and manufacturing in the UK continued to fall annually; at an advanced pace. There was small glimmer of positive news with July’s figures for manufacturing production showing an increase in the monthly level, from -0.4% to +0.1%, but the annual level slid once again from 2.1% to 1.9%, enhancing the dire state of the UK’s industrial sector.
The main focus on the UK market will be today’s Bank of England meeting; even with the central bank expected not to make any change to either the key interest rate or the asset purchase target, last month’s meeting showed a shift in the voting towards providing further monetary stimulus, and the market will be looking for the next minutes release to see if there has been any advance on this.
The Euro again made some small gains against the Pound but fell against the US Dollar, the EUR/USD exchange rate coming down from 1.4083 at the mornings open to 1.4048 by the days close. There was some positive news though; with German industrial production figures showing a marked increase in both the monthly and annual levels; from 6.6% to 10.1 and from -1.0% to 4.0% respectively. After disappointing factory order figures the day before, it was a welcome boost for the Euro-zone, with some questions marks hanging over the current state of the strongest member state’s most important sector.
This morning has already seen the release of July’s German trade balance; which was a worse result than expected; the nations trade surplus contracting from 12.7 billion Euros to 10.4 billion; hardly surprising considering the release of last months export figures for the nation, which saw a sharp drop. There is a possibility that a strong currency is hindering Germany’s exporting capability; and it will be interesting to see if the ECB President; Jean-Claude Trichet faces any questions on the subject at today’s ECB rate meeting. Today’s ECB meeting is not expected to see any changes made to the base interest rate; or the central bank’s approach to bond-purchasing; but as always, one of the key factors will be the post-decision press conference; where the ECB President will give more insight into the central bank’s current thinking, and expectations for the coming months.
For the third day running, the US Dollar gained across the board in the currency exchange market, pushing back against the Euro and the Pound, the GBP/USD exchange rate falling from 1.6016 at the mornings open, down to 1.5941 by the end of the day. The release of the Federal Reserve’s Beige Book economic survey yesterday painted a fairly so-so picture of the overall economy. Local businesses reported little growth and some decline in sales, with manufacturers also giving a negative outlook. The service sector did see some improvements, but the housing market remained subdued; with the banking sector reporting little demand for loans, especially from consumers and commercial real estate companies. This could add more fuel to the argument that the Federal Reserve will need to undertake further monetary stimulus in the coming months (QE3), which would potentially see enhanced economic growth.
Today will see the release of July’s US trade balance figure; with the headline level expected to show a decrease in the nation’s trade deficit; from -53.1 billion dollars, to around -51.0 billion dollars. This would suggest either an increase in exports, or a drop in imports from the nation. With the Fed’s beige book survey yesterday revealing that auto retailers are struggling due to slower stock supply from Japan; this could be a contributing factor.
This Daily Market Update is brought to you by The Market Team @ KBRFX – Exchange Rates & Foreign Currency Transfer specialists.
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