Daily Foreign Exchange Market Update

During yesterday’s market session the Pound weakened against the Euro and the US Dollar with the GBPEUR rate opening at 1.2504, a daily high and fell throughout the day before closing at a daily low of 1.2469. The GBPUSD rate opened at 1.5985, dropping early morning to a daily low of 1.5964, peaking around lunch time to a daily high of 1.5989 before closing slightly higher at 1.5983. Yesterday was a quiet day for data release in the UK with the most significant piece being the month on month Halifax house price index which shows the change in prices of homes financed by HBOS. The previous figure was -0.4% and the actually figure missed the 0.5% forecast, coming out at -0.7%, showing lower activity in the housing market. There will be no data coming out of the UK.

The Euro gained strength against both the Pound and the US Dollar in the foreign exchange market yesterday with the EURUSD rate opening at a daily low of 1.2784 and closing out at a daily high of 1.2818. Yesterday the Bundesbank released the results for German factory orders which shows the change in total value of new purchase orders placed with manufacturers. The result came out much lower then expected, -3.3% compared to -0.3% showing that there is less activity in the manufacturing sector. Today the Greek government will meet to discuss austerity plans. They will vote and decide on whether the measures in the ‘medium term financial strategy 2013-2016’ will be implemented. There are expected to be a wave of 48 hour public sector strikes against wage and pension cuts but Prime Minister Antonis Samaras is expected to marginally win support for these austerity cuts.

The US Dollar gained some strength against the Pound but lost some against the Euro during yesterday’s market session. However this morning the Dollar quite a bit of ground against the Pound and the Euro due to the announcement of Barack Obama holding Presidency for the next four years.

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

Foreign Exchange Daily Market Update 29/06/11

The Pound slipped further against the Euro yesterday, not the news that consumers who are buying Euros were looking for. The GBP/EUR rate dropped from 1.1163 at the morning’s open, to trade at 1.1142 by the end of the day. There was better news for people buying Dollars though, as the rate picked up from 1.5982, to break back through the 1.60 barrier, with the GBP/USD exchange rate closing the day at 1.6018. The Pound was not helped by the final reading of 1st quarter UK GDP, which although showed no change in the quarterly growth rate of 0.5%, the annual figure was revised downwards from 1.8% to 1.6%. This is a real blow for economic growth prospects in the UK, and the foreign exchange market showed its negative response to this news with the rates dropping as the figures were released.

Today’s economic docket from the UK has seen mortgage approvals show a slight monthly increase, up from 45,400 to 45,900; a positive increase, but falling below the market expectations for a reading closer to 46,300. There are no other figures of real economic note set for release from the UK, but one major piece of news from Europe could well have a big effect on any movements in the currency exchange market.

Following a day of gains against both the Pound and the US Dollar, the Euro will be open to the possibility of sharp movements today. As well as the release of Euro-zone consumer confidence figures, the market will be focusing on the outcome of a vote in the Greek Parliament on austerity measures. For any solutions to be implemented and the IMF to give Greece access to extra funding, this austerity measure bill will need to be passed in Parliament. The market could see a sharp reaction if there is any fallout, and the minute possibility that the bill will not be passed.

The US Dollar did weaken slightly against the Euro and the Pound across the course of yesterday; and the currency was not helped by a poor market reaction to US consumer confidence figures. With the market forecasting only a small drop, from 61.7 to 61.0, the actual figure reported a huge drop down to 58.5. This shows that positive sentiment from the US consumer has fallen significantly, and could be an early indication of a slowdown in personal income and consumer spending, which would translate to an overall slowdown in economic growth.

Today’s US economic docket will see the release of pending home sales figures, and the market will be looking to see if there is any positive support from the housing sector. With the labour market weakening, and also consumer expectations lowering, the currency will need to see some positive sings from this sector if there are to be any gains.

Foreign Exchange Daily Market Update 24/06/11

The Pound lost ground against the US Dollar in the foreign exchange market yesterday, the GBP/USD rate falling below the 1.60 mark for the first time since the start of April. This drop instantly puts pressure onto UK consumers who are buying Dollars, with the lower exchange rate meaning that dollar buyers will get less currency for their money. Despite the weakening against the Dollar, the Pound made a small gain against the Euro over the course of the day, closing the UK business day at 1.1278, up from the morning’s low of 1.1246. The only real economic data of note from the UK yesterday was the release of the British Bankers Association (BBA) loans for house purchase figures for May, which showed a slight increase, up from 30,000 to 30,509.

The economic docket for the UK today has no scheduled data releases; so barring any important UK Government statements, or economic-related events, the Pound will be left open to movement based on risk sentiment within the currency exchange market, and key data releases from the world’s other major economies.

The Euro did slip slightly against the Pound throughout Thursday, as mentioned above; giving a small boost to UK consumers who are buying Euros, and also fell against the US Dollar. The EUR/USD rate dropped to 1.4164 by the day’s close, down greatly from 1.4269. The European economic docket did little to support the currency, with French and German PMI Manufacturing figures reporting lower, and the combined Euro-zone PMI results for manufacturing and services also falling, consequently the composite figure reporting far lower than expected.

Today’s European economic docket has already seen the release of German IFO figures, which has seen a positive increase. The German firms who are surveyed to produce the reading have shown that their view of the business climate and current assessment of the overall economic picture has improved since last month’s survey. However, their monthly reviewed expectations for the following 6 month period haven’t improved at all. The market will be watching closely for any news out of the EU leader’s summit in Brussels, with sovereign debt in Greece, and the possibility of debt contagion spreading to nations such as Ireland, Spain and Portugal likely to be high on the agenda.

The US Dollar strengthened across the board yesterday, pulling higher against both the Pound and the Euro. This can be attributed to risk-aversion in the market, with the Dollar traditionally benefiting from its status as a safe-haven currency; with speculative traders usually buying Dollars to avoid any uncertainty in the market such as the current Greek bailout situation in Europe. The currency was also aided by positive economic news, with new home sales for May reporting an increase, up from 310,000 to 319,000; a welcome boost for the US housing market.

The currency may not see much movement based on today’s US economic docket, with durable goods orders the only figure of note set for release. The figure is widely expected to report an increase, which would be a positive result for the US economy as a whole, but may not be sufficient to push the currency in any direction, by itself.

Mike Hood
KBRFX

Foreign Exchange Daily Market Update 22/06/11

The Pound ended up losing ground against the Euro, but making a small gain against the US Dollar through the course of yesterday. The GBP/EUR rate slipped down to 1.1269 from the mornings open close to 1.13, with the GBP/USD exchange rate picking up a touch from 1.6227 to 1.6238 by the end of the day. There wasn’t a great deal of data released from the UK, but the figures that were published showed that Public Sector finances increased in the month of May, from 6.6 billion pounds up to 11.1 billion pounds. But contrary to this, Public Sector Net Borrowing dropped from 16.5 billion pounds to 15.2 billion pounds, showing that the UK Government has increased the amount of funds it diverts into the public sector; but is finding this capital from non-borrowed sources.

The major data event for the UK today will be the release of the Bank of England’s minutes from their last policy meeting. Whilst there was no change in either the base rate, or asset purchase target at the last meeting; the minutes will be studied closely for any signs of a shift in rhetoric; and the all important voting numbers, which may be indicative of future policy. The foreign exchange market is likely to take direction from any surprises within the minutes.

The Euro managed to gain some ground against the Pound and the US Dollar yesterday, despite the ongoing Greek bailout situation. With finance ministers pushing hard for a solution, the market may be viewing a possible resolution as a sign of strength within the European community, and consequently the GBP/EUR rate is still fairly low, making it tougher for UK consumers buying Euros. The economic docket from Europe yesterday was also fairly disappointing, with the ZEW economic surveys showing that sentiment in Germany and the Euro-zone overall fell drastically.

Today will see the release of the Euro-zone industrial new orders figures from April, and also Euro-zone consumer confidence figures for June. The currency could strengthen if the figures show positive gains, but any push is more likely to come from the bigger ongoing risk-event of Greece’s sovereign debt problems and the potential contagion of this to other nations such as Ireland, Spain and Portugal.

The Dollar did fall slightly against the Euro and the Pound in the currency exchange market yesterday, despite some fairly positive economic figures. Existing home sales figures showed an increase for the month of May, with sales figures up to 4.81 million from the previous month’s level of 4.80 million. This took the market growth percentage up from -5.00% to -3.80%, a sign that the housing market is gradually improving.

Today’s US economic docket will focus solely on the Federal Reserve’s interest rate decision, and the accompanying press conference. Exactly as the market will focus on the Bank of England’s minutes release, any shifts in rhetoric or policy stance will affect the currency; with a positive rhetoric from the Fed having the potential to push the GBP/USD exchange rate back down, making it more expensive for UK consumer buying dollars.

Mike Hood
KBRFX

Foreign Exchange Daily Market Update 21/06/11

The Pound closed yesterday lower against the Euro, but slightly higher against the US Dollar in the foreign exchange market. The GBP/EUR rate opened at 1.1354, but closed trading just under 1.1315; the GBP/USD rate picking up to 1.6206 from the day’s open at 1.6128, a good gain for the Pound, making it slightly more attractive for UK consumers who are buying Dollars. There were no economic data releases from the UK yesterday, so the currency was left open to market movements based on sentiment and news from other world economies.

Today’s UK economic docket will focus on public sector finances; with the monthly figures for public sector net borrowing and public finances set for release. The market will watch closely to see if the UK Government is sticking to it’s pledge to make deep cuts to reduce the overall debt level, but there could well be a knock-on effect that harsh austerity measures will affect overall economic growth.

The Euro managed to regain some strength against the Pound yesterday, even in the face of disappointing economic data. Yesterday saw the release of German producer price figures for May, and with a sharp drop in the month-on-month figure, from 1.0% growth to 0.0%, and also the annual level falling from 6.4% to 6.1%, it would have made sense for the Euro to weaken slightly, but the result was completely the reverse. It may well be that the currency is finding strength from the strong rhetoric from the EU, that it will reach a suitable solution for Greece, with European Commission President José Manuel Barroso insisting that Greece will ‘never’ be allowed to go bankrupt. Barosso drew parallels with the global financial crisis that started with US banking giant Lehman Brothers going bust; and stated ‘’A country going bankrupt is much more delicate than a bank that would affect all EU members. No, we should never allow a country to go bankrupt.’’ Whilst the Euro continues to find strength, it will make it more expensive for UK consumers who are buying Euros.

Today’s economic docket from Europe contains the highly influential ZEW Economic Sentiment surveys for Germany and the overall Euro-zone. The ZEW survey conveys the opinions of select financial experts on the direction of inflation, interest rates, exchange rates, and the stock market over the next six months, and any shock result in its findings does have the potential to strengthen or weaken the European currency. EU finance ministers are also still working hard to try and produce solution to Greece’s debt woes, and the currency exchange market may take direction from the outcome of this.

The US Dollar weakened against the Pound throughout yesterday, and with no economic data to support the Greenback it also fell sharply against the Euro. The EUR/USD rate peaked at 1.4314, up from the morning’s open at 1.4203.

The economic docket from the US today is comprised solely of housing data; with existing home sales figures for May set for release. Sales are expected to drop, both annually and month-on-month, and in a market that is still fairly weak in the US, it is not a positive sign for the overall economic picture, and could weaken the Dollar slightly on release.

Mike Hood
KBRFX

Foreign Exchange Daily Market Update 16/06/11

The Pound ended the day with the rate practically unchanged against the Euro; at 1.1372, but considerably lower against the US Dollar, falling from 1.6368 at the open of the European market, down to just under 1.6200 at the close of play. The influential data on the UK’s economic docket yesterday was all labour-market related. The Office for National Statistics (ONS) reported that claimant count increased by 19,600 to 1.49 million in May. Analysts had expected a rise of 7,000 and the figure represents the biggest rise since July 2009. However, the jobless total fell by 88,000 in the three months to April to 2.43 million - its biggest drop since August 2000. The UK Government is hoping that private firms will create jobs as posts are cut in the public sector were given a boost with news that employment in the private sector increased by 104,000 in the first three months of the year to 23 million jobs. Annual earnings increased by 1.8% in the year to April, down by 0.6% on the previous month, largely because of lower growth in bonuses in private firms.

Foreign exchange traders looking at today’s UK economic docket will focus solely on retail sales, with levels forecast to drop both monthly and annually, from 1.1% to -0.6% and 2.8% down to 1.5% respectively. A growth in retail sales is traditionally considered a good indicator of increase in consumer demand, and consequently economic growth, so should the figures report lower as expected, it doesn’t provide a positive outlook for the UK economy, so the Pound may well come under pressure.

Europe continues to face pressure in the currency exchange market in light of the struggle to find a suitable solution for Greece. This saw the GBP/EUR exchange rate move drastically overnight, up from 1.1370 to peak at 1.1460 in the early hours of this morning. Even with the rate falling back slightly to 1.1420 currently, it makes it a lot cheaper for UK based consumers who are buying Euros. In regards to the potential Greek bail-out: it is a German-inspired plan that suggests a further cash reserve may be needed by the Greek government if the European Central Bank refuses to accept its downgraded bonds as collateral. Such a plan to rework Greece's debts could force Euro-zone countries to fork out billions of extra Euros to avoid economic collapse. The European Commission warned an extra 20 billion Euros could be needed. Protests have broken out in Greece as a 24-hour anti-austerity strike by the country's largest labour unions crippled public services.

Former IMF chief economist Raghuram Rajan’s comments may go some way to settle the market as he stated that restructuring of Greece's debt looked increasingly probable as Athens lacked the political will to carry out widespread privatizations of state assets and budget tightening. "If the debt restructuring happens in a way that banks and markets are prepared for, even if not publicly but at least privately, it is very well containable," he said. But there was a stark warning from Rajan, with him saying "A restructuring which happens because the dialogue breaks down will be more complicated because that would suggest that there will be implications for Ireland, for Portugal and so on, and that could be more problematic down the line."

The European economic docket will be focused on inflation today, with Consumer Price Index (CPI) figures set for release at 10:00. The data may well give the market some doubt that an imminent rate-hike by the ECB is necessary, as CPI is set to hold unchanged at 1.6% month-on-month, and the annual figure is set to drop slightly from 2.8% down to 2.7%. Even though a figure of 2.7% annually would be above the ECB’s target level, a drop may indicate that the rise in inflation is temporary; and will fall naturally over time, consequently not requiring a further tightening of monetary policy to contain it.

The US Dollar strengthened greatly against both the Pound and The Euro yesterday, making it more expensive for UK consumers who are buying Dollars. The Greenback was helped by figures that reported a jump in consumer prices, both monthly and annually. The fact that CPI rose to 3.6% annually, and up from 1.3% to 1.5& month-on-month shows that consumer demand in the US is increasing, and should the inflation figures start to rise too fast, it will put pressure on The Federal Reserve to look at tightening monetary policy to prevent price growth becoming damaging.

The economic docket from the US today is comprised mostly of low- to-medium level market data, which includes building permit figures, along with housing starts and initial jobless claims. Slight increases in any of these figures would provide support to the US Dollar, as it would show a positive contribution to the economic picture. One figure that will be watched closely by the market is the Philadelphia Fed survey, which focuses mainly on manufacturing. An increase, which is predicted by the market, would indicate a positive outlook from manufacturers, and could see increased production levels, which is positive for the Dollar.

Mike Hood
KBRFX

KBRFX Homepage
Twitter - KBRFX

Foreign Exchange Daily Market Update 15/06/11

Price action on the British Pound was choppy yesterday as UK consumer inflation data caused a mixed reaction among foreign exchange traders. Inflation in May came in line with expectations; holding at 4.5%. This result was unchanged from April’s reading, which was the fastest pace of price growth since October 2008. Core inflation eased from 3.7% to 3.3% over the same period, missing expectations to slow to 3.5%. The drop in core prices leaves some traders speculating that the Bank of England will maintain its dovish policy. As rate hike expectations decreased, the GBP/USD exchange rate pulled back from its high of 1.6441 to 1.6377. The less influential retail price index also saw annual price growth remain steady at 5.2%.

Employment data headlined the UK docket this morning, with forecasts calling for the number of people seeking jobless benefits to rise in May by 6,500 individuals. However market participants were disappointed when official figures revealed that the number of jobless claims rose by 19,600 and the previous month’s increase of 12,400 claims was revised up to 16,900. The news is a hard knock to the UK jobs market and comes amid Government spending cuts to the NHS, Police and Armed Forces. The surprise increase in claims however did not affect the claimant count rate, which remained at 4.6% or the ILO Unemployment rate which held at 7.7%. The Pound fell against the Euro to 1.1350 and to 1.6312 versus the US Dollar, making the currency exchange market less viable for buying Dollars and buying Euros.

In the Euro-area, finance chiefs remained divided yesterday on how to involve private investors into the Greek bailout program, while at the same time keeping the European Central Bank happy. Finance ministers were under increased pressure as the International Monetary Fund (IMF) has recently threatened to withhold their share of the original bailout package if a compromise cannot be reached, and further to this Standard and Poor's lowered the nation's credit rating to CCC. Ministers closed the meeting without coming up with a solution; however, the group has imposed a dead-line of 20th June for an agreement to be reached. Luxembourg’s Finance Minister Luc Frieden remained optimistic that a solution would be reached before the deadline saying, “it’s not exceptional at an informal meeting not to have a decision. But the goal is clearly to have a solution by the end of the month.” The lack of an immediate solution saw the Euro weaken and fall back from its earlier highs; the EUR/USD exchange rate heading back towards 1.4440 and GBP/EUR retracing to levels above 1.1330.

Meaningful economic data will be thin on the ground for the Euro-zone today, meaning Euro traders will have to focus on the Euro-zone Industrial Production figures for price direction. Economists forecast that production will have cooled in April from an annualised rate of 5.6% down to 4.8%. This predicted slowdown in production will most likely weigh on the Euro which is already struggling against the as yet unresolved sovereign debt issue.

Yesterday's US Advance Retail Sales for May showed that consumer spending contracted by 0.3% amid speculation that sales will plummet by 0.5%. The decline in sales was to first to be recorded in 11 months and followed a downwardly revised increase of 0.3% in April. While the contraction in sales was weaker than expected the news still casts a poor light on the US economy. At the same time May’s Producer Price Index (PPI) increased expectations that the Federal Open Market Committee (FOMC) will raise interest rates later this year, when prices grew by 7.3% annually to beat expectations for price growth to remain stable at 6.8%. With inflation on the rise the Federal Reserve will be expected to act with an interest rate hike and curb price growth before it gets out of hand, and it is with this expectation that the US Dollar enjoyed a brief rally against both the Euro and the Pound.

Off the economic docket, Fed Chairman Ben Bernanke urged the US Congress to raise the debt ceiling citing that failure to do so could lead to credit rating downgrades and damage the treasury market. The Fed Chairman said that even a brief period of delay on the Treasury’s debt obligations could, “cause severe disruptions in financial markets and the payment system.” Earlier in the month, Moody’s Investor Services warned that the US could have its AAA credit rating placed under review unless Congress took steps towards compromising on raising the $14.3 trillion debt ceiling. At present the issue is that Republicans refuse to raise the debt ceiling unless the Democrats agree to sever spending cuts, but Bernanke has warned that the debt ceiling is the “wrong tool” for lowering the nation’s budget deficit.

Looking ahead the Consumer Price Index (CPI) is expected to have risen in May by 3.4% up from 3.2% in the previous month, while the core index is expected to see a more modest increase from 1.3% to 1.4%. With yesterday's PPI showing a greater than forecasted increase in price growth its highly likely that the CPI reading will exceed the consensus as higher production costs are often passed onto the consumer. As mentioned earlier higher inflation will most likely stoke expectations the FOMC will raise interest rates to keep inflation in check and thus the foreign exchange market could see a rally on the Dollar. Later into the US session the Dollar could see further potential gains when June's Empire Manufacturing index and more importantly May's industrial production figures are announced. Both sets of data are predicted to show improvements in manufacturing and production from the previous month's readings, with the Empire figure rising from 11.88 to 12.00 and industrial production is set to rise by 2% following a month of stagnant growth.