Daily Foreign Exchange Market Update

Yesterday in the foreign exchange market we saw the Pound gain ground against the Euro and the US Dollar. The GBPEUR rate opened the day at a daily low of 1.1646 and strengthened until it closed out at a daily high of 1.1703. The GBPUSD rate followed a similar pattern, opening at a daily low of 1.5218 and closing out at a daily high of 1.5269. The Dollar also saw losses against the Euro with the EURUSD rate opening the day at 1.3068 and closing out at 1.3048.

It was a quiet day for data release yesterday with the main figure being Eurozone consumer confidence. It was expected to come out at -24 but came out slightly better at -22.3. US existing home sales for March came out better than expected, falling by 0.6% compared to the previous month.

There is expected to be a lot more data coming out today, we have already seen German and French PMI data be released. German PMI for services came out at 49.2 and for manufacturing, 47.9, both figures worse than expected. French PMI for services and manufacturing came out at 44.1 and 44.4 respectively, better than predicted. Eurozone PMI for services and manufacturing has just been released, at 46.6 and 46.5 respectively showing an expected deterioration in business conditions.

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

Daily Foreign Exchange Market Update

Last week we saw the Pound lose ground against the Euro with the GBPEUR rate opening at 1.2459 and closing out at a weekly low of 1.2371; it did hit a weekly high of 1.2467 at the open of trade on Wednesday. The Pound did however see gains against the US Dollar during last week’s market session with the GBPUSD rate opening at a weekly low of 1.5902 and closing at a weekly high of 1.6031. Last week we saw UK public sector net borrowing be released with the figure coming out lower than expected at £6.5B showing a surplus which is good news for the economy. The MPC minutes from their last meeting were released too with the data showing all members voting to keep the base rate at 0.5%. This week will see the revised GDP figure be release which is set to remain at 1.0% and Thursday will see Mervyn King hold a press conference about the financial stability report.

The Euro gained against the Pound and the US Dollar in the foreign exchange market last week with the EURUSD rate opening at a weekly low of 1.2763 and closing at a weekly high of 1.2958. The main news from the Euro-zone last week was that of Moody’s cutting France’s credit rating from AAA to AA1 and the other credit rating agency, Fitch, giving it a negative outlook for the next year. French, German and Euro-zone PMI results all came out better than expected and the German 3Q GDP figure came out at 0.2%, as expected. Monday will see the Euro-group meeting be held in Brussels to discuss a range of financial issues such as the Euro support mechanism. On Thursday Italy will hold a bond auction on their 10-year bonds.

The US Dollar lost ground against both the Pound and the Euro in the foreign exchange market last week. It was a relatively quiet week for data release due to Thanksgiving but unemployment claims came out better than expected, 410K compared to the 415K predicted. This week the main data release will be durable goods orders which are set to fall by 0.6%. This shows a lower amount of consumer confidence as durable goods are those that last for at least three years so the initial investment must be worth it. Thursday will see the preliminary quarter-on-quarter GDP figure be released which is set to rise from 2.0% to 2.8%.

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

Daily Foreign Exchange Market Update

In the foreign exchange market yesterday we saw the Pound lose ground against the Euro but gain against the US Dollar. The GBPEUR rate opened at a daily high of 1.2456 and lose momentum throughout the day before it hit a daily low of 1.2421 in the afternoon, closing out the day at 1.2433. The GBPUSD rate opened the day at a daily low of 1.59 and gained strength throughout the day to close out at a daily high of 1.5935. The main news coming from the UK yesterday were the results of the public sector net borrowing, the amount of new debt held by the government. The figure came out much lower than before, 6.5B compared to the 9.9B last month. There will be no data coming from the UK today.

The Euro gained against the Pound but saw losses against the US Dollar in the foreign exchange market yesterday. The EURUSD rate opened at a daily low of 1.2765 and gained throughout the day to close out at a daily high of 1.2816. There was no data released from the Euro-zone yesterday but today has already seen German PMI be released, up to 46.8 from 46 last month. Euro-zone PMI has also been released, up slightly from 45.7 to 45.8.

The US Dollar weakened against both the Euro and the US Dollar in the foreign exchange market yesterday. This came off the back of jobless claims which came out higher than expected, down from 451K to 410K. Today is Thanksgiving in the US, a public holiday, so no data will be released.

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

Daily Foreign Exchange Market Update

The Pound lost ground against both the Euro and the US Dollar during yesterday’s foreign exchange market session. The GBPEUR rate opened at 1.2519, a daily high, falling for the first few hours before hitting a daily low of 1.2480 an hour before midday, closing the day slightly higher at 1.2489. The GBPUSD rate also opened at a daily high of 1.6013, falling throughout the day to reach a daily low of 1.5957 an hour before the close of trade, closing out the day at 1.5975. Yesterday saw UK Purchasing Manager Index for services be released with the result of 50.6 being slightly lower then the predicted level of 52.0 showing there is a very small expansion within the services sector. Today will see industrial and manufacturing production showing the change in total inflation-adjusted value of output produced by manufacturers. Industrial production came out worse then expected at -2.6% and manufacturing production also came out worse but it was a positive figure of 0.1%.

The Euro gained strength against the Pound but weakened against the US Dollar yesterday with the EURUSD rate opening at 1.2792, peaking early to 1.2807 before dropping to a daily low around lunch time to 1.2767 before closing out the day at 1.2791. Yesterday saw Spanish unemployment change being released with the result being much higher than expected, 128.2K compared to 90.3K, bad news for the labour market in Spain as this is the highest change since February this year. Today will see French, German and Italian PMI be released with the possibility of the Euro strengthening if the results surpass the predicted levels.

Yesterday saw the US Dollar gain against both the Pound and the Euro in the foreign exchange market. The only piece of significant data coming out of the US yesterday was the ISM non-manufacturing PMI which came out slightly lower then expected, 54.2, but still above the 50 level showing an expansion in the sector. Today is a quiet day for economic data release but will see Americans going to the polls to vote on who will be their President for the next four years. The outcome will be very important for the economy as a whole and in the next few days we could see the Dollar swing either way depending on who wins.

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

Daily Foreign Exchange Market Update

Yesterday the Pound gained against the Euro and the US Dollar in the foreign exchange market. The GBPEUR rate opened at 1.2402 dropping during the first half of the day to a daily low of 1.2382 around midday. It then strengthened across the rest of the day before closing at a daily high of 1.2439. The GBPUSD rate opened at a daily low of 1.6091 and strengthened throughout the day to close out at a high of 1.6130. No data was released from the UK yesterday and the only result released today is the Purchasing Manager’s Index (PMI) for October which came out lower then expected, at 47.5 compared to the analysts’ view of 48. PMI is an indicator of economic activity and roughly put, it reflects the percentage of purchasing managers in a certain sector that reported better of worse business conditions compared to the previous month, where a result over 50 shows and expansion and below 50, a contraction.

The Euro lost some ground against both the Pound and the US Dollar during yesterday’s market session with the EURUSD rate opening at 1.2975, peaking early morning to 1.3021 but then falling throughout the rest of the day to close out at a daily low of 1.2971 with the two main pieces of data coming from the Euro-zone yesterday were German retail sales and French consumer spending. German retail sales which show the total value of inflation-adjusted sales at retail level came out at 1.5%, much higher then the previous and expected results of 0.1% and 0.4% respectively. French consumer spending, which is the change in inflation-adjusted value of all goods expenditure by consumers, came out slightly lower then expected, 0.1% compared to 0.2% but much higher then the previous result of -0.8%. Today, there has been no data released from the Euro-zone.

The US Dollar weakened against the Pound but gained against the Euro yesterday of the back of no data being released. US consumer confidence for October has just been released and has come out higher at 72.2 from 68.4 and the ISM manufacturing has also come out slightly higher, 51.7 compared to 51.5.

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

Daily Foreign Exchange Market Update

Yesterday the Pound fall slightly against the Euro in the foreign exchange market with the GBPEUR rate opening at 1.2282, climbing throughout the first half of the day, peaking to a daily high of 1.2307 just after lunch. However over the rest of the day it lost strength to close at a daily low of 1.2280, only marginally down from the opening rate. The Pound also weakened against the US Dollar during yesterday’s market session. The GBPUSD rate opened at 1.6012 and rose to a daily high mid-morning to reach 1.6021 but then lost strength over the rest of the day to close out at a daily low of 1.5932. Only one piece of tangible data was released yesterday, the British Bankers’ Association (BBA) loans for house purchases, the number of new mortgages approved for house purchases by BBA-approved banks which accounts for approximately 65% of all mortgages. The Governor of the Bank of England, Mervyn King, spoke yesterday at the Chamber of Commerce where his main concern was that banks do not have enough capital to absorb losses on bad loans which in turn makes it harder for them to borrow and provide credit needed by households and businesses. Today there will be no data being released from the UK.

The Euro gained strength against the Pound but lost some against the US Dollar during yesterday’s market session. The EURUSD rate opened at 1.3037, peaking early morning to a daily high of 1.3041 but then slipped down below the 1.30 mark to close out at a daily low of 1.2972. Yesterday the eurozone consumer confidence results were released, a survey on 2300 consumers in the eurozone, the figure coming out at -25.6, slightly higher then the previous result of -25.9 showing pessimism within the eurozone. This morning has seen German PMI (Purchasing Manager Index) figures being released, coming out lower than expected, 45.7 compared to the predicted rate of 48. This has seen the Euro lose strength against the Pound showing it may be a good time to be buying Euros. Later today the President of the ECB, Mario Draghi will speak at a closed-door meeting at the Bundestag, Berlin. The meeting is set to cover the budget, EU affairs and finance within the eurozone.

The US Dollar gained against both the Pound and the Euro in the foreign exchange market yesterday even though no data came out of the US. Today will see the Federal Open Market Committee (FOMC) meet and decide on whether to keep the key interest rate the same or change it. It is currently 0.25% and nearly all analysts believe it will be kept at this rate; however the FOMC statement on this contains their outlook on the economy in general and hints about future monetary policies which is why analysts keep a close eye on the releases.

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 13/06/11

The British Pound had a tough time against the US Dollar over the course of last week. The currency slipped against the Dollar early in the week when the International Monetary Fund (IMF) lowered its growth forecasts growth forecasts for the UK in 2011 from 1.7% to 1.5%. However, the Fund did support the UK government's austerity measures; saying that it remains ‘’appropriate’’ for the Bank of England (BoE) to uphold the "current scale of monetary stimulus". The comment lowered rate hike expectations amongst foreign exchange traders, with the drop in expectation reinforced on Thursday when the BoE held the benchmark interest rate at the historic low of 0.50% and asset purchases at £200 billion. A negative outlook was reiterated for the Pound on Friday, when it was reported that both industrial and manufacturing production was down in April. Industrial production contracted by 1.7%, despite calls for output to remain flat, while manufacturing, which was expected to see a mere 0.1% decline fell by a staggering 1.5%. The data echoes the weaker Purchasing Manager's Index (PMI) readings seen earlier this month and paints a poor outlook for the UK economy. This left the GBP/USD exchange rate to close the week at a low of 1.6220.

This week; Consumer Price Index (CPI) figures for May are due for release on Tuesday, but with the BoE expected to maintain its current monetary policy for most of the year, a better than expected reading of 4.5% may not stoke an appreciation in the Pound. However there may be some optimists in the currency exchange market who may feel differently, so a move to the upside is still possible. Employment figures follow on Wednesday with the number of people seeking jobless benefits claims expected to rise by 6,500 in May, with the claimant count rate expected to hold at 4.60%. The ILO unemployment rate is expected to hold at 7.7%. Should the figures come in as expected, it doesn’t present a hugely encouraging result, but any surprises could spark a movement in the Pound. A slowdown in retail sales from April to May could see the Pound trading lower on Thursday, where it may remain lower against the other majors, as Friday's docket remains bare and therefore unlikely to support the Pound.

A mix of sovereign debt fears and poor economic data hurt the Euro's standing against the other major currencies last week. The Euro had started well with rate hike expectations rising on Monday morning when April's Producer Price Index (PPI) grew by 0.9% month-on-month ahead of a 0.8% forecast. The rally was quickly reversed though when German Finance Minister Wolfgang Schäuble expressed that it was not absolutely certain that Greece would receive further bailout funding. Tuesday's Euro-zone retail sales figures and Germany's factory orders both came in above the consensus reading for April, supporting the single currency until Wednesday; which proved a dire day in terms of sentiment for the Euro-zone. A contraction in Germany's exports for April, coupled with weaker industrial production weighed on the Euro, with further negative sentiment coming in the form of a Reuters article saying that the EU, IMF and ECB would not provide further aid unless Greece could resolve under-financing in its adjustment programme.

The Euro continued to slide despite ECB President Jean-Claude Trichet using the key phrase "strong vigilance", in his post rate decision conference on Thursday, to signal a strong likelihood that rates would rise in July. The phrase was used by the central bank's head following the ECB's decision to hold rates at 1.25%, in line with expectations. This would typically lift the Euro against the other currencies, however Trichet went on to say that further tightening measures would follow a rate hike in July and that the central bank has lowered its growth forecasts for 2012. The news kept the Euro under pressure so that by Friday the GBP/EUR exchange rate breached the 1.13 barrier, making conditions better for buying Euros.

European data will be on the thin side this week, with the first item of note being Wednesday’s release of industrial production for the Euro-zone. The data may push the exchange rate lower as forecasts call for production to contract by 0.2% in April. Thursday's Euro-zone CPI readings could allow the Euro to regain any potential losses if inflation comes in above the forecast 2.7% annual growth rate, while an improvement in the accompanying employment rate could see further gains. However the Euro looks set to end the week on a bad note as April's Euro-zone trade balance is expected to see a trade deficit of 1.9 billion Euros.

In what was an extremely quiet week for the US in terms of economic data, the US Dollar performed well. The Greenback benefited from a drop in rate hike expectations for both the UK and the Euro-zone, while Europe was further hampered by trying to resolve Greece's debt issues. A speech in Atlanta by Fed Chairman Ben Bernanke and Wednesday's Fed Beige Book report were the most significant events to take place on the US calendar. On Tuesday the Fed Chairman put fears over another round of quantitative easing to rest when he said he would maintain the current level of monetary stimulus until labour market conditions boost economic activity, but did see the need to expand the current stimulus package. Bernanke went onto say that the US economy was still growing, albeit at a slightly slower pace than previously, and his comments were backed up by the Fed's Beige Book stating that economic conditions "warrant exceptionally low levels for the federal funds rate for an extended period." Finally, on Friday, the Dollar ended the week on a high note when May's monthly budget statement reported a smaller than expected budget deficit, allowing the EUR/USD exchange rate to fall below 1.6350 as the Dollar rallied against the other majors.

This week’s US docket will start with Tuesday's PPI figures for May. Forecasts call for factory gate inflation to fall slightly from 2.8% to 2.6%, while the core index (without food and energy prices) is expected to remain at 2.1%; indicating that food and energy prices may be on the way down after being elevated for so long. Advance retail sales figures will accompany the PPI, but could push the Dollar lower as sales are set to contract in May.

Wednesday's CPI readings seem set to contradict the earlier PPI figure, as consumer inflation is set to rise from 3.2% to 3.4%, potentially bolstering the Dollar through rate hike expectations. Further to this June's Empire Manufacturing index and May's Industrial Production figure are expected to improve. Falling jobless claims and a rise in Housing starts could see the Dollar strengthen on Thursday, although the expected decline in Building Permits may cloud the picture. Lastly, Friday's University of Michigan confidence index could weaken the Dollar, as consumer sentiment is expected to fall in June, while May's Leading Indicators composite index is expected to improve by 0.3% and could potentially soften the Dollar's decline.

Foreign Exchange Daily Market Update 03/06/11

Thursday's trading session saw the Pound continue its decline against the other major currencies and enjoyed only a brief moment of relief when May's Construction Purchasing Manager's Index (PMI) came in above expectations. The construction PMI showed that activity within the UK's construction sector accelerated at a faster pace than was seen in the previous month as the index reading moved up from 53.3 to 54.0, beating expectations for a PMI of 53.5. The outcome allowed the GBP/USD exchange rate to briefly peak at 1.6417 before crashing back down to levels of 1.63. The Pound was also burdened by the Bank of England's (BoE) Paul Fisher who, in an interview with the Daily Mail, was reported to say that should the economy take another turn for the worse, that he would consider increasing the size of the central bank's asset purchases. With the BoE highlighting the ongoing weakness within the economy and rate hike expectations remaining subdued, the Pound will most likely face an uphill struggle for the remainder of the year.

The final in the PMI series, the services PMI, is due for release this morning and the general consensus is for a slight slowdown in activity for May. The index is set to slip from 54.3 to 54.2 and has the potential to push the Pound lower as the economic outlook worsens. However a better than expected reading could boost the Pound, but given the backlog of sour data, the Pound could struggle to maintain any such gains.

Despite Thursday's docket remaining bare of economic figures for the Euro-zone, the Euro managed to rally against both the US Dollar and the British Pound, with the exchange rate peaking at 1.4486 versus the Dollar and GBP/EUR falling to 1.1310. The currency made progress on the foreign exchange market following news that Greece has accepted to carry out another round of austerity measures, a move that brings the country closer to receiving another tranche of aid from the International Monetary Fund (IMF) and European Union. At the same time credit ratings agency Moody's Investors Service lowered Greece's credit rating to Caa1 from B1 and raised the nation's risk to default on its debt to 50%, but this news failed to impact the Euro's progress.

For Europe, the week will end with the final revisions to May's Services PMI for Germany, France and the Euro-zone as a whole, which are expected to remain unchanged from their preliminary readings. However as seen earlier in the week, the manufacturing PMI's for the same period were revised down from their preliminary readings, so it might be possible that the services sector has suffered a similar fate. If so then the Euro could retrace some of its gains from early in the week.

Following the announcement that non-farm productivity in the US rose at a greater than expected pace during the 1st quarter, the Dollar rallied against most of the other major currencies. According to the US Labor Department, productivity rose by 1.8% to beat expectations for a 1.7% increase. The currency received further support from its weekly jobless claims figures which showed a modest drop in first time claims for jobless benefits from 428,000 to 422,000. However the figure missed estimates for 420,000 claims to be filed. Continuing claims fell slightly from the previous week's figure of 3.712 million to 3.711 million claims, but failed to fall the consensus level of 3.675 million claims.

The Dollar's upward trend didn't last long on the currency exchange market however; this is most likely due to apprehension over the upcoming Non-farm Payrolls figure which headlines this afternoon's session. Forecasts call for the US economy to add a mere 165,000 jobs in May, the lowest increase in a four month period. A weaker than expected reading on such an influential piece of data could stoke a contraction in risk appetite, pushing the US Dollar and its other safe haven partners (The Swiss Franc and Japanese Yen) higher against the other majors, and the opposite could also be true with a better than expected reading increasing the likelihood of trader's buying up higher yielding currency pairs. Elsewhere on the docket the unemployment rate is expected to tick lower from 9.0% to 8.9% and the ISM non-manufacturing composite is expected to show that service based activity improved in May.

Foreign Exchange Daily Market Update 02/06/11

Yesterday's disappointing economic data reinforced a weakened outlook for the UK, leading the Pound to trade lower on the currency exchange market. The exchange rate on GBP/USD slipped to a low of 1.6373 as manufacturing grew at its slowest pace in 20 months during May as confirmed by the Purchasing Manager's Index (PMI) slipping to 52.1 from 54.4. Mortgage approvals for April didn't help either when the number of mortgages approved totalled 45,200 missing the forecasted figure of 47,000. The data has dampened expectations that the Bank of England (BoE) will raise interest rates this year as higher interest rates could damage the nation's economic recovery, and while the foreign exchange market continues to foresee rates remaining at their historic low, the Pound may well remain suppressed.

On today's docket the construction sector's PMI, stands alone in terms of data to be released from the UK. Economists expect activity in the construction sector to have picked up in May with the index set to rise from 53.3 to 53.5. The data has the potential to lift the Pound should it come out on target; however a lower than expected reading will simply extend the Pound's loses against the other majors.

The Euro continued to gather strength over the course of yesterday's European session although weak manufacturing data lead to some volatility on the EUR/USD exchange rate which ranged from 1.4384 to 1.4458, while against the Pound, rates fell to a low of 1.1350. Germany's finalised PMI reading for May showed that manufacturing activity was lower than previously thought as the index fell from the preliminary score of 58.2 to 57.7, and the Euro-zone index followed a similar path, revised down from 54.8 to 54.6. Today the Euro-zone will be taking a day off from releasing any economic data; as such traders will once again focus on developments in the Greek debt crisis for guidance on price action.

The US has not fared much better with regards to economic figures, as the ADP Employment change survey showed that the US economy added a bitterly disappointing 38,000 jobs in the month of May. This fell drastically short of the consensus figure of 175,000 jobs which was lower than April's addition of 179,000. Further to this the ISM manufacturing index showed that activity within the manufacturing sector slowed to its lowest level since September 2009, when the index fell from 60.4 to 53.5. Yet despite the downbeat data, the US Dollar advanced against the likes of the Pound, the Euro, the Canadian Dollar and many others, failing only to make gains against the other safety linked currencies: the Swiss Franc and Japanese Yen.

Given the poor performance of yesterday's ADP employment figure, today's weekly jobless claims will take on greater significance given that they can support or discredit the ADP report. Last week's initial jobless claims figure proved disappointing, with the number of first time claimants rising. With weakness in the labour market being evident the same outcome may occur in this week's reading, despite the consensus calling for claims to drop to 417,000 from 424,000. A lower than expected reading would dampen the outlook for Friday's Non-farm Payroll (NFP) figure to provide a positive outcome. Still historically there has been a difference between the NFP and the ADP figures in terms of gauging the health of the US labour market, so yesterday's weak figure may not have much bearing on Friday's report.

Foreign Exchange Daily Market Update 01/06/11

Tuesday saw the Pound lose ground against the Euro and the US Dollar as the economic docket for the UK remained devoid of figures for a second day. Looking ahead to today's figures, April's mortgage approvals are set to slip from 47,600 approvals in March to 47,000 while net lending secured on dwellings is expected to rise from £0.4 billion to £0.7 billion. May's Purchasing Manager's Index (PMI) for the manufacturing sector could weaken the Pound's standing. A lower reading than the expected 54.1 index figure will most likely drive the currency lower, whilst a better than expected outcome could lift the gloomy outlook and push the currency higher.

The Euro saw some support on Tuesday when talks of Greece receiving a second bailout reached the foreign exchange market. According to the Wall Street Journal, German Officials eased off the pressure on getting Greece to restructure its debt before securing additional funds. As part of the deal Greece will have to accept additional austerity measures to receive further funding from the International Monetary Fund (IMF) and the EU. Among other requirements Greece will have to extend its public sector pay freeze, make cuts in civil service benefits and limit the nation's capital expenditure. Since this is a significant hurdle to have jumped, in securing additional funds, the news pushed the Euro exchange rate to a high of 1.4414 against the US Dollar and to 1.1420 against the British Pound.

Today final revisions to the German and Euro-zone manufacturing PMI for May headline the European docket. The index reading for Germany is expected to remain unchanged at 58.2 and the Euro-zone's reading to hold at 54.8. Any surprise downward revisions could see the Euro lose some of the gains it made yesterday, whereas a better than expected reading will extend its advance.

Yesterday's price action was mixed with regards to the US Dollar. Despite economic figures disappointing market traders, the Dollar made gains against the British Pound with the currency pair hitting a low of 1.6423. Whilst against the Euro, the Dollar managed to regain some ground after the single currency rallied following the possibility of Greece receiving a second bailout. On the data front Consumer Confidence fell in May to 60.8, the lowest level to be seen in six months. The index fell from an upwardly revised 6.6 in April, missing estimates for sentiment to improve to 66.6. Further to this the Chicago Purchasing Manager Index fell further than expected, slipping from 67.6 to 56.6 to mark its lowest reading since November 2009.

Economic figures due out today look set to provide a weaker outlook for the US economy and as such could stoke a reversal in risk sentiment on the currency exchange market, which lead to an appreciation for the Dollar through safe haven trading. To start with the ADP Employment Change survey is expected to show that the number of employed fell from 179,000 to 178,000 in May. Later into the session May's ISM Manufacturing index is estimated to fall from 80.4 to 57.2, indicating that manufacturing activity is cooling but still showing signs of growth.

Foreign Exchange Daily Market Update 24/05/11

The Pound fell against the Dollar and the Euro yesterday as foreign exchange traders scaled back their appetite for risk. The Bank of England's (BoE) Chief Economist, Spencer Dale, voiced his opinion on UK inflation in an interview yesterday with the Financial Times (FT). Dale stated that the BoE should raise interest rates gradually over the next two years as a means of combating inflation, and as such has been voting for a 25 basis point hike in the interest rate for the past 3 policy meetings, alongside fellow MPC member Martin Weale. Dale said in the FT - "I don't take lightly the impact this (possible rate hike) could have on some families. But I think the cost to our economy as a whole - were inflation to persist for longer and our credibility start to be eroded - would be even worse." Dale's statement does go some way to support the possibility of the BoE raising the interest rates at some point over the next 12 months, and this expectation could well provide some support for the Pound over the coming months.

April's Public Sector Borrowing and Public Finance figures headline the UK's economic docket today. Expectations call for government borrowing to fall from £16.4 billion to £4.4 billion, which would be a positive sign for the economy and in turn the Pound. So should the figure fall in line with estimates, expect to see the exchange rate improve.

A weakened outlook and sovereign debt fears continued to weigh on the Euro yesterday with the Dollar making early gains against the single currency. The Euro's decline was not helped by worse than expected readings for Euro-zone and German Purchasing Managers Indexes (PMI) for April. Germany's index readings for service and manufacturing based activity fell to 54.9 and 58.2 respectively, missing estimates for readings of 57.0 and 61.0. For the Euro-zone manufacturing activity slowed with a PMI of 54.8 down from 58.0 and service based activity slipped from a reading of 56.7 to 54.9, bringing the composite index down from 57.8 to 55.4. The outcome would suggest that the Euro-zone is suffering from the effects of a slowdown in the global economy.

The currency exchange market has already seen a heavy dose of European data this morning, the most influential of which being Germany's final revisions to first quarter GDP. The revision showed that the economy expanded at a rate of 1.5% quarter-on-quarter, which was in line with preliminary readings, while annually the economy had grown by 5.2%. Despite the economy growing as expected, the individual components of the GDP figure were mixed resulting in the Euro currency's decline upon release of the data. One note of worry was that private consumption, investment in construction, and domestic demand of German goods came in well below expectations.

On a more positive note, Germany's IFO business sentiment gauges came in higher than expected. The current assessment index showed that German business remained as confident as last month about present conditions, when the index edged up 0.4 to 121.4, while the outlook for the next 6 months remains relatively weak with the future expectations gauge slipping slightly from 107.7 to 107.4. Lastly, new industrial orders in the Euro-zone are expected to have contracted in the month of March by 1.1% sequentially from February's 0.5% reading. Like yesterday's manufacturing PMIs, the decline of industrial orders points suggests that the slow down in the global economy is affecting the Euro-zone.

Falling risk sentiment boosted the Dollar's standing against the other majors yesterday, as it benefited from its status as a safe haven currency. The fall in risk appetite has been stoked by the sovereign debt crisis in the Euro-zone and perhaps more importantly, by the economic slowdown in China. As the world's second largest economy, China is considered very important in gauging the health of the global economy. News overnight showed that China is set to miss GDP estimates for 2011 as Premier Win Jiabao's campaign to rein in inflation is restraining growth in the economy. Published in today's Economic Information Daily were comments from government researcher Ba Shusong saying he's "concerned about a policy over-adjustment" as "China's economy faces a risk of an excessive downturn" if the central bank's tightening measures last too long.

Housing data from the US makes an appearance on the economic calendar today. The sale of new homes in April is expected to rise by 1.7% to bring the annual total to 305,000 units sold from 300,000. However, given that last week saw existing home sales slump over the same period and both building permits and housing starts contract, the possibility that new home sales will fall below expectations is very real. If the outcome comes inline with analysts' expectations then the Greenback is likely to find support, however if the figure falls below the consensus then the currency could see potential weakness.

Foreign Exchange Daily Market Update 23/05/11

Last week's mix of economic figures produced some choppy price action in the currency exchange market as far as the British Pound was concerned. The currency saw gains on Tuesday when it was announced that Consumer Prices rose by 4.5% year-on-year to beat analysts' expectations for a 4.1% increase. The higher than forecast inflationary data stoked expectations that the Bank of England may raise interest rates later this year, and that policy makers will have take a more hawkish stance towards monetary policy. However on Wednesday, the MPC's minutes showed that the vote to maintain the current base rate of 0.5% remained unchanged at 6-3, with Andrew Sentance, Martin Weale and Spencer Dale being the three to vote for a rate hike. Despite the minutes showing that inflation is expected to hit 5%, most policy makers saw risks to the economic recovery if rates are raised too quickly. As rate hike expectations faded the Pound slipped to this week's low of 1.6105 against the Dollar. The Pound's decline was further aided by April's jobless claims rising by 12,400 in April instead of remaining unchanged as economists had expected. But the Pound didn't remain subdued for long, and received a welcome boost on Thursday with higher than expected retail sales figures for April showing month-on-month growth of 1.1% ahead of the estimates for a mere 0.8%.

A light week of economic figures lies ahead for the UK, which doesn't start until Tuesday when April's Public sector finances are published. Forecasts call for government borrowing to fall to £4.4 billion down from £16.4 billion and the outcome has the potential to lift the Pound if forecasts are correct. The big figure of the week though is the Office for National Statistic's preliminary reading for first quarter GDP. Economists believe that the UK's growth rate will stagnate at 0.5%. If this forecast is correct, it will mean that the UK has not grown since the third quarter of last year, and will most likely result in Pound's decline.

The Euro put in a strong performance for much of last week, making gains against both the US Dollar and the Pound. At the start of the week, a summit of European finance ministers was being held in Brussels. Finance ministers agreed to endorse Portugal's €78 billion bailout package, but the package still requires approval by all euro-area governments, and is expected to run over a 3-year period if approved. With regards to Greece, the summit asked the nation to sell assets and deepen its spending cuts in order to win an extension of its aid package to €110 billion. However the Greek debt crisis has caused some controversy among member nations, as there is some discussion over whether debt restructuring is even a possibility for Greece. The uncertainty over Greece's future meant that on Friday the Euro slipped massively from a high of 1.4345 to below 1.42 against the US Dollar, while against the Pound the Euro ended the week at 1.1476.

On the data front, the single-currency benefited early on from a better than expected Euro-zone trade balance surplus in March, with a figure of €2.8 billion, rising from the previous reading of - €3 billion. On Wednesday the ZEW economic sentiment gauge underperformed for both Germany and the Euro-zone but the figure still remained positive. Lastly, Germany's Producer Price Index grew at a pace of 1.0% month-on-month beating forecasts for 0.6% and lifting expectations that the ECB may raise interest rates for a second time this year.

European figures dominate the foreign exchange market this week by sheer volume alone, the big figure of which being the final revisions to Germany's first quarter GDP. The preliminary reading of 1.5% is expected to remain unchanged. However while Germany's economic growth should prove to be a boost the value of the Euro there are a number of economic factors that point toward a weakened outlook for the region. On Monday Purchasing Manager Indexes (PMI) for Germany and the Euro-zone point to slowing growth in both manufacturing and services sectors, on Tuesday Germany's IFO business sentiment readings are also expected to tick lower from April. Further to this, Wednesday will see Germany's forward looking consumer confidence survey by market researcher GfK, with positive sentiment forecast to fall in June, and on Friday the Euro-zone economic confidence survey for May is expected to follow down a similar path. Potentially this week could lead the Euro lower if confidence in the region fails.

Housing market woes weighed on the Dollar on two separate occasions in the last week. On Tuesday both building permits and housing starts for the April came in below estimates with a contraction of 4.0% and 10.6% respectively. Thursday's existing home sales figures for the same period showed a 0.8% contraction. Further to this May's Empire manufacturing figure, April's Industrial Production, the Philadelphia Fed index and last the April's Leading Indicators composite index all pointed to a weaker production outlook for the US. However, by Friday, despite a lack of economic data, the Dollar regained some ground against the Euro as sovereign debt fears made room for gains to be made against the single-currency.

US housing data will be on the cards once again this week when on Tuesday April's new home sales are expected to slow to 1.7% growth down from 11.1% in March. However with last week's housing data coming in below estimates, there is a very good chance that traders will see the same outcome. This will then be followed by Friday's pending home sales which are set to decline by 1.0% month-on-month. Should this happen then the Dollar should weaken against the other majors. April's forecast contraction in Durable Goods Orders could also weigh on the Dollar, as well as the expected decline in house prices in March. By Thursday the Dollar could finally get some respite when the annualized first quarter GDP figure crosses the wire showing that the economy grew by 2.2%. Lastly income and spending estimates may leave the Dollar trading lower yet again, as forecasts call for the growth of personal income to slow to 0.4% from 0.5% and for spending slow to 0.5% down from 0.6%.