Foreign Exchange Daily Market Update 18/10/11

The Pound finished yesterday’s trading session lower against the US Dollar but managed to regain some lost ground against the Euro. The foreign exchange market saw the GBP/EUR exchange pick up form an early morning low of 1.1365 and advance to a high of 1.1473 near the close of the European market. The GBP/USD exchange rate move in exact opposition with the currency pair peaking at high of 1.5847 at the session’s open, then falling sharply to the day’s low of 1.5733 before recovering to levels of around 1.5770. Yesterday’s docket was devoid of UK economic figures meaning the Pound’s strength was subject to events in the wider world.

This morning the UK has seen its Consumer Price Index (CPI) for September come in above expectations with the month-on-month reading rising to 0.6% instead of 0.4% as predicted. The year-on-year reading also rose above the consensus of 4.9% to 5.2%. The immediate market reaction was for a drop in the GBP/USD exchange rate from 1.5772 to 1.5741, the GBP/EUR rate fell from 1.15 to 1.1485. However given that the Bank of England has initiated another round monetary stimulus, the rise in inflation is unlikely to spur the central bank into raising the interest rate meaning this initial reaction will probably be short lived.

The Euro weakend against both the Pound and the US Dollar over the course of yesterday’s trading session. The single currency was not helped by news that both German Chancellor Angela Merkel and the country’s Finance Minister Schaeuble could not see a solution to the European debt problem being revealed by the weekend. This meant that EUR/USD exchange rate slipped from an early high of 1.3914 down to 1.3740 before the close of the market.

On the docket today, the currency exchange market will see the release of Germany’s ZEW survey on economic sentiment for the month of October. Forecasts call for the sentiment index to worsen from September’s reading of -43.3 to -45. Should the survey results fall in-line with the market concensus, then the Euro will most likely continue its downward journey against the other major currencies, as the economic outlook for Europe’s biggest eocnomic contributor worsens.

The US Dollar gathered strength against both the Euro and the British Pound through yesterday’s markets. News of Europe’s struggle to solve its debt crisis aided the Dollar’s advance, but domestic news also provided the currency with an opportunity to strengthen when September’s industrial production figures came in-line with expectations at 0.2%.

Looking forward to today’s economic calendar, September’s Producer Price Index (PPI) is scheduled for release with expectations calling for the core PPI to slow from to 2.5% to 2.4% annual growth, while the total PPI follows suit by slowing to 6.45 form 6.5%. Elsewhere Federal Reserve Chairman Ben Bernanke will be speaking in Boston this afternoon. The Chairman’s words may sway the market should he speak of confidence in the US economy, which will result in an appreciation in the Dollar, whereas should he speak of weakness in the US economy then the reverse could be true.

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