Foreign Exchange Daily Market Update 23/09/11

The Pound yet again finished lower against the Euro and the US Dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate closed at 1.4126; only slightly lower from the morning’s open at 1.1429, but the GBP/USD exchange rate fell heavily again, from 1.5456 down to 1.5350 across the course of the day. There was no significant economic data released from the UK yesterday; with the currency facing pressure from an ever strengthening Dollar which has been boosted by both the ongoing debt issues in Europe; and the Federal Reserve’s $400 billion asset purchase plan.

This morning will see the release of Augusts BBA loans for house purchase figures, with the market forecast for a decline in the level; which would not be positive for the Pound, as it would further reinforce weakness in the UK’s housing market.

The Euro did make a small advance against the Pound, but dropped against the US Dollar yesterday. The EUR/USD exchange rate fell from the mornings open at 1.3523 to trade down at 1.3432 by the days close. There has been increased speculation that the Euro-zone could fall back into recession, and that Greece may struggle to receive further funding from the IMF, which has seen a further shift in the currency exchange market towards the US dollar. There was plenty of disappointing economic data released from Europe yesterday, with French and German PMI manufacturing and services data showing rapid declines for the month of September. The EU PMI figures for manufacturing, services and also the composite level showed declines too, putting further pressure on the Euro currency.

There is no significant data set for release from Europe today, with some low-level figures from Italy and France already released, and having little effect on the market overall.

The US Dollar is continuing to find strength across the board, boosted by the Federal Reserve’s decision to divert $400 billion to extend the overall maturity date on securities that it holds; in the central bank’s words ‘’To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate’’. The currency has also benefited from its safe-haven status, with a worsening outlook across Europe seeing a shift towards the US currency. Yesterday saw an increase in the US’s house price index for July, up monthly from 0.7% to 0.8%, but a slight drop in the leading indicators figures, which saw a drop from 0.5% to 0.3% for August.

Akin to Europe, there are no significant data releases scheduled from the US today.

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