Foreign Exchange Daily Market Update 16/09/11

The Pound fell against the Euro but made a small advance against the US Dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate which opened at 1.1448 started falling rapidly at around 2:00pm and closed down at 1.1408. Economic data released from the UK yesterday was disappointing, with retail sales figures for August showing a drop in both the annual and monthly levels, with a decrease from 0.0% to -0.1% annually and from 0.2% to -0.1% month-on-month.

There is no data scheduled for release from the UK today, leaving the currency open to market movements based on risk sentiment and news from the world’s other major economies.

The Euro continued to find strength in the currency exchange market, gaining against both the Pound and the US Dollar. The EUR/USD exchange rate advanced from the mornings open at 1.3762 and was at 1.3865 by the close of the UK trading day. The main focus for Europe yesterday was the release of the ECB’s monthly report, which explained the bank’s actions and movements over the previous month. The central bank confirmed that previous rate rises were to strengthen confidence, growth prospects and job creation, but left the rate unchanged last month as it foresees downside risk to growth and inflation. The bank stated that is sees liquidity levels within the Euro-zone as adequate, and that monetary expansion is continuing to ‘gradually recover’.

As with the UK, there are no real figures of note set for release from Europe today, so the currency will be open to movement based on news events around the world, and trading in the speculative market.

The US Dollar followed with another day of losses yesterday, closing lower against the Euro and also the Pound. After making a small overall drop the previous day, yesterday saw the GBP/USD rate move from 1.5763 up to 1.5807 at the day’s close, a good gain for the Pound. Figures released from the US yesterday showed that inflation rose annually for August, the annual price-growth rate increasing from 3.6% to 3.8%, but fell month-on-month from 0.5% to 0.4%. Industrial production also fell in August, from 0.9% to 0.2%, but the latest Philadelphia Fed Index showed a positive increase, with the previous month’s level of -30.7 coming up to -17.5, still negative overall; but a good increase in positivity.

This afternoon we will see the result of July’s Net long-term TIC flow figures from the US, which were previously negatively affected by the nations credit rating downgrade, and will give an insight into the balance of stocks, bonds and money market funds that flow to and from the US. The University of Michigan will release its latest confidence reading today, with the market forecast for a positive increase from 55.7 to 56.6, which could see the US dollar find some extra strength.

This Daily Market Update is brought to you by The Market Team @ KBRFX – Exchange Rates & Foreign Currency Transfer specialists.