Daily Foreign Exchange Market Update 26/10/11

The Pound finished yesterday slightly higher against the Euro, but a touch lower against the US Dollar in the foreign exchange market. The GBP/EUR exchange rate which opened at 1.1491 finished the UK business day trading at 1.1501 with the GBP/USD exchange rate closing at 1.5994, down from the morning’s open at 1.6007 following a very choppy trading session. There was a small disappointment in terms of UK economic data yesterday as September’s BBA loans for house purchase numbers showed a decline from 35,009 to 33,130 amid market forecasts for a sharp increase.

There is no significant market-moving data scheduled for the UK today; leaving the currency open to shifts in risk sentiment and news from the world’s other major economies.

The Euro ended the day marginally lower versus both the Pound and the US Dollar in the currency exchange market. The EUR/USD fell across the day from the morning’s open at 1.3927, to trade at 1.3906 by the market close. There was some positive data release form the Euro-zone, with November’s German GfK consumer confidence survey showing a small increase to 5.3, up from the previous month’s reading of 5.2.

Today is likely to be a very high-pressure day for the Euro. This morning will see the European Central Bank (ECB) release its latest bank lending survey; which will give some insight into how much extra capital Euro region financial institutions have been seeking; in what are turbulent times for banks trying to reduce their risk levels and steady their balance sheets. The main focus though will be on the EU summit in Brussels; with the market expecting European leaders to announce an increase in the size of the European Financial Stability Facility (EFSF) to around €1 trillion, a commitment to a further Greek bail-out and also an injection of further capital into European banks Despite the market feeling that resolution may be nearing; there has been a shock in the cancellation of the EU finance ministers meeting that was scheduled for today; which would suggest that a detailed solution is unlikely to be produced this evening. There are huge political connotations to any sort of resolution, with many European nations most notably Germany facing the possibility of political rebellion as many parties feel that the risk being imposed to support other member states will prove to be the beginning of the end.

The US Dollar, which would traditionally benefit from turmoil in world markets failed to make any significant gain against the Pound yesterday, and only rose marginally against the Euro. The currency was hit by a hefty drop in consumer confidence levels for October, the headline number falling from 46.4 to 39.8 amid a progressively worsening outlook across the nation.

Today will see the release of September’s durable goods orders figures, with the market forecast for a fall in orders, from 0.1% to around 0.9%, which could see the Dollar weaken further.

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