Daily Foreign Exchange Market Update

The Pound saw itself weaken against the Euro and the US Dollar in the foreign exchange market yesterday. The GBPEUR rate opened at 1.2422, a daily high, and lost strength across the day before closing out at a daily low of 1.2374. The GBPUSD rate opened at 1.5964 and quickly gained strength, hitting a daily high of 1.5979 early morning. Throughout the rest of the day it weakened before closing out at a daily low of 1.5930. There was no data released from the UK yesterday and none will come out today.

The Euro gained strength against both the Euro and the US Dollar during yesterday’s market session. The EURUSD rate opened the day at a daily low of 1.2851 before hitting a daily high of 1.2899 at midday, closing the day out at 1.2874. Yesterday we saw German, French and Euro-zone PMI all come out better than expected, some good news for once. Today German GDP figures have been released with the year-on-year and quarter-on-quarter figures coming out in line with predictions, 0.4% and 0.2% respectively. Today there is also a Euro-zone economic summit where heads of state will meet and discuss future plans for Spain and Greece.

The US Dollar saw some gains against the Pound but weakened against the Euro in the foreign exchange market yesterday. There was no data from the US yesterday as it was Thanksgiving and none will be released today

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 in the foreign exchange market the Pound saw some gains against the Euro but a slight loss in strength against the US Dollar. The GBPEUR rate opened at 1.2519 before quickly dropping to a daily low of 1.2508 soon after the opening bell. It then gained some strength across the rest of the day and peaked just after lunch to 1.2561, closing the day out slightly lower at 1.2540. The GBPUSD rate opened the day at 1.5984, dropping mid-morning to a daily low of 1.5929 before gaining strength in the first hour of the afternoon, peaking to a daily high of 1.6005, closing the day out slightly lower at 1.5977. Yesterday the main news was that the Bank of England will keep the base rate at 0.5% and the asset purchase target at £375B, as expected by analysts as last month third quarter GDP came out at 1%. Today will be a quiet day with no data being released from the UK.

The Euro weakened against the US Dollar and the Pound during yesterday’s market session. The EURUSD rate opened at 1.2767, a daily high and lost ground during the first few hours of trading, dropping to 1.2719, closing slightly high at 1.2740. Like the UK the main data from the Euro-zone yesterday was the fact that the ECB decided to keep the main interest rate at 0.75%. Today will see various pieces of information being released, the main being German CPI (inflation) which is expected to remain at 2.0%, in line with previous results showing a steady rate of inflation in Germany.

The US Dollar gained some ground against the Pound and the Euro in the foreign exchange market yesterday. The most significant piece of data from the US yesterday were the unemployment claims which were better than expected, 355K compared to the predicted 367K showing a lower rate of people claiming unemployment insurance. Today will see the University of Michigan release their consumer sentiment results which assesses the confidence of consumers within the economy based on personal finance, business conditions and purchasing power. The figure is calculated by subtracting the percentage of unfavourable replies from the favourable ones and this month it is set to come out at 82.9, slightly higher then last months result of 82.6.

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 saw the Pound lose strength against the Euro and the US Dollar in the foreign exchange market, with the GBPUSD rate opening at a daily high of 1.6066 and falling throughout the day to close out at a daily low of 1.6020 at the end of trade. The GBPEUR rate opened at 1.2449, gaining strength before peaking at a daily high of 1.2453 around midday. It lost some ground throughout the rest of the day, dropping to a daily low of 1.2413 an hour before the end of trade where it closed out at 1.2423. There was not a lot of data coming from the UK yesterday, with mortgage approvals and change in net lending to individuals being the two most significant. An increase in mortgage approvals, 48.7K to 50K shows more confidence from lenders which can also be linked to the other data release, change in net lending to individuals, the amount of new credit issued to customers which hit a four year high. Augusts’ result was -0.3B and the predicted figure for September was 0.6B, however the actual result came out at 1.7B showing a much more confident outlook from lenders.

The Euro gained some ground against the Pound but lost some versus the US Dollar. The EURUSD rate opened up at 1.2904 remaining fairly unchanged throughout the day before fluctuating quite substantially several hours before the close of trade. It peaked at a daily high of 1.2924 and then dropped and closed out at a daily low of 1.2896 at the end of trade. Yesterday saw German CPI (inflation) being released with the figure coming out in line with the analysts expectations, 2.0%. As the headline figure for inflation, CPI tracks the change in price of a basket of goods bought by consumers and it reflects the purchasing power of the Euro in Germany. This morning saw German unemployment figures being released with the unemployment rate remaining unchanged at 6.9% but the unemployment changed being 20K, double the predicted figure of 10K which is bad news for the German labour market.

It was a good day for buying US Dollars as it gained against both the Pound and the Euro in the foreign exchange market. Yesterday US consumer expenditure was released, measuring a price change in consumer goods and services came out in line with the predictions of 1.7%. Like CPI results it is a good forecast of inflation but it differs from CPI as it only measures goods and services that are targeted towards and consumed by individuals. Today consumer confidence, data that assesses consumer sentiment on business conditions, employment and personal income will be released and it is set to rise from 70.3 to 73. Each month the Conference Board survey 5,000 people on their expectations on future economic conditions so an increase like predicted shows a greater level of confidence within the market by consumers.

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 saw the Pound move significantly against the Euro and the US Dollar in the foreign exchange market due to the release of UK third quarter GDP results. The GBPEUR rate opened at 1.2281 on Monday morning, dropping to a weekly low of 1.2247 on Monday afternoon before gaining strength throughout the rest of the week. When GDP results were released on Thursday the GBPEUR rate spiked above the 1.24 mark. It carried on rising until it peaked to a weekly high of 1.2496 Friday afternoon, closing slightly lower at 1.2442. The GBPUSD rate opened at 1.6036 and fell for throughout the first two days of trading, closing out on Tuesday afternoon at a weekly low of 1.5913. On the release of UK GDP results the GBPUSD rate peaked to a weekly high of 1.6144 on Thursday afternoon, closing the week slightly lower at 1.6091. The main data from the UK last week was the third quarter GDP results which were better then expected, coming out at 1% compared to the predicted 0.6% the catalyst for the strength in the Pound. This week will be a quiet week for UK data release with mortgage approvals being the most significant piece being released, a figure that shows the amount of mortgages approved in September, with the figure set to be 48.7K, up from the previous months result of 47.7K, showing a greater deal of confidence from lenders.

The Euro lost strength against the Pound and the US Dollar during last week’s market session; the EURUSD rate opened at 1.3057 and peaked to a week high of 1.3083 at the close of trade on Monday. It lost strength throughout the rest of the week, reaching a weekly low of 1.2882 on Friday morning before closing the week out slightly higher at 1.2935. There was not that much data released from the Euro-zone last week, the major piece being Euro-zone PMI which came out below the 50 mark at 45.3 showing an expected decrease in business conditions. This week will see more significant data being released with the first piece being German CPI (inflation) year on year for October which is expected to be 2%, slightly lower then the previous inflation figure of 2.1%. German unemployment rate is also set to be released with the figure expected to come out slightly higher at 6.9%, from 6.8% last month.

The US Dollar lost ground against the Pound but gained against the Euro in the foreign exchange market last week. The major data release was the GDP figure that was higher then expected, 2% compared to 1.8% showing a heightened level of growth in the US economy. This week will be a fairly busy week for data release with personal consumption expenditure and consumer confidence both coming out later this week. Personal consumption expenditure is predicted to rise from 1.6% to 1.7% showing consumers are buying more goods, therefore have a greater level of confidence. Consumer confidence, which assesses consumer sentiment regarding business conditions, unemployment and personal income and is also set to increase from 70.30 to 73.0.

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 11/07/11

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The Pound finished last week much higher against the Euro but slightly lower against the US Dollar in the foreign exchange market. The GBP/EUR exchange rate was quite low at Monday’s market open, trading at 1.1090, but moved up steadily over the week to close on Friday at 1.1246, actually hitting a high of 1.1280 during the mid-afternoon on Friday; a much-needed boost for people buying Euros. The GBP/USD rate opened at 1.6110 and fell to a low of 1.5935 on Friday morning, before picking up slightly to close the week at 1.6031.

The economic calendar provided a mixed picture for the UK last week. Monday saw the release of June’s PMI construction figure, which saw a downturn from 54.0 to 53.8. Tuesday was slightly more positive with June’s PMI services figure coming in above estimates, showing an improvement from 53.8 to 53.9. On Wednesday, the UK’s housing market received a welcome boost, with the Halifax house price report showing a monthly increase from 0.4% to 1.2%, and the 3 month-to-June figure showing an upward move from -4.2% to -3.5%. Thursday kicked off with Industrial and Manufacturing figures, which both showed upturns in the annualised and month-on-month levels, but the market was more focused on the Bank of England’s interest rate meeting. As expected the central bank kept the base rate and the asset purchase target on hold, with the market feeling that the MPC had little other option to do so, with an interest rate having the potential to destroy the UK mortgage market and make thousands of homeowners default, and any increase to the asset purchase target could start driving inflation higher. The week closed out on Friday with PPI input and output figures, with the annualised levels showing an increase from 16.1 % to 17% and from 5.4% to 5.7% respectively.

The week ahead for the UK is data-heavy; with the economic docket opening on Monday with RICS house price balance figures reporting. The forecast is for an improvement from -28% up to -25% which would be positive for the housing market. Tuesday will see the release of the Nationwide Consumer Confidence figure, with any drop or increase likely to create waves in the currency exchange market. The data continues on Tuesday with annualised and monthly consumer price index figures, along with retail price index and visible trade balance figures reporting. The Pound is likely to take direction from any increased positivity from these figures. Arguably, the most market-focused data of the week is on Wednesday, with the ILO unemployment rate expected to hold at 7.70%, jobless claims expected to fall, but the claimant count rate to show a slight percentage increase. The UK labour market is still quite fragile, and should there be any signs of weakness, the Pound could certainly suffer.

The Euro suffered badly in the foreign exchange market last week. As well as being hammered by the Pound, the EUR/USD rate also fell steadily across the week, dropping from 1.4525 on Monday’s open to close at 1.4254, hitting a low of 1.4204.

The European economic docket was overall fairly negative across the week. Monday saw a drop in Euro-zone PPI, the annual rate falling from 6.7 to 6.2%. Tuesday saw a similar pattern with Euro-zone PMI composite figures along with retail sales falling. The negative pattern continued through Wednesday, with German factory orders for May reporting a fall, from 2.9% down to 1.8%, and Thursday opening with German industrial production falling annually from 9.3% to 7.6%. The main focus of the week was the European Central Bank’s interest rate meeting on Thursday. As was almost certain, the ECB pressed on with their tightening of monetary policy, and raised the base rate to 1.5%, up from 1.25%, the second rate-hike this year. Traditionally a rate hike would see a currency appreciate; but whilst the raising of rates will help to counteract inflation – the ECB’s sole mandate, it could well prove damaging to European nations, businesses and consumers with any form of high-level or base-rate linked borrowing., and could stunt economic growth across the Euro-zone. The week finished with some positive news, in that the German trade balance continued to show an increased surplus, with the level increasing from 10.8 billion Euros to 14.0 billion Euros.

This week’s European data releases will see some high-level market data. Tuesday will see the release of German CPI figures, with the EU harmonised level set to fall from 2.4% to 2.3%, a result the ECB will take heart from as it may support their thinking that higher rates will bring inflation down. Wednesday will focus on Euro-zone industrial production figures, with the annualised rate set to fall from 5.3% to 4.8%, but the monthly figure to increase from 0.2% to 0.4%. The Euro currency is likely to see sharp movement depending on the tone of the ECB’s July report which will be released on Thursday, along with Euro-zone CPI (inflation) figures. If the ECB report contains any phrases pertinent to another rate-hike this year the currency could well weaken, as the market would view it as a bridge too far for the Euro-zone, and almost certainly damaging to economic growth across the European area.

The US Dollar managed to take advantage of the poor market reaction to the ECB’s rate-hike, and gained considerably against the Euro across the week, also pulling back slightly against the Pound before falling away on Friday afternoon following very disappointing Non-farm payroll figures.

The US market was closed on Monday, for the 4th of July celebrations, so Tuesday was the first sign of any economic data; with factory orders for May showing a slight increase, up from 0.8% to 0.9%. Wednesday’s main economic release was negative though, with ISM non-manufacturing figures reporting a downturn in activity, from 54.6 to 53.3, not supporting the US currency and economic outlook. Thursday was a slight glimmer of hope for the US, particularly the labour market, with the ADP employment change figure increasing drastically from 36,000 jobs to 157,000, smashing market forecasts of around 70,000. This helped the US Dollar hugely, with the figure indicating that the following day’s non-farm payroll data could also be equally as impressive. This was not to be the case though, with Friday’s headline figures showing that the US unemployment rate went up, to 9.2% from 9.1%, and the No-farm payroll figure disappointed hugely, recording a drop from 54,000 down to a mere 18,000. It was this huge miss on estimates that saw the Dollar lose its gains and the GBP/USD exchange rate push back up from 1.5935 to 1.6031 by the weeks close.

The US economic docket this week will kick-off on Tuesday with US trade balance figures; and with the market expecting the negative trade balance to increase, it will be an indication of the US’s increasing reliance on imported goods, and will not be positive for the currency. The Federal Reserve will also release the minutes from their last policy meeting on Tuesday; with the market watching closely for any signs of a rate-hike in the offing, and hoping for positive comment in terms of future growth prospects. Wednesday will see Fed Chairman Ben Bernanke present his semi-annual monetary policy report to Congress, with the currency market poised to take sharp movement from any negative rhetoric on the part of the Fed. It is almost certain that the issue of the US’s debt ceiling needing to be raised to guarantee future repayments will be brought up, as Bernanke may be pressed for comment on how a refusal/or approval from the IMF of the plan could affect policy. Thursday will see the release of advance retail sales figures for June, which is expected to show an upturn, along with PPI figures. Friday could have a huge bearing on the direction of the US Dollar, with CPI annual and monthly figures being released. Any increases in the overall inflation rate could put pressure on the Federal Reserve to start thinking about raising rates, and on the flip-side, a downward movement would dampen any rate-hike expectations, possibly weakening the currency. The final day of the week will also see the widely-respected University of Michigan confidence index report, with the market forecasting an upturn in the level; which could benefit the US Dollar. The Michigan confidence survey is seen as a very timely indicator, and a good early predictor of economic upturn or slowdown by the foreign exchange market.

Mike Hood
KBRFX

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Foreign Exchange Daily Market Update 07/07/11

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The Pound continued to gain against the Euro, but did fall slightly against the US Dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate moved up from 1.1147 to trade above 1.1166 by the end of the day, a welcome change from the previous few days’ downward movement, and making it cheaper for UK consumers buying Euros. The GBP/USD rate slipped slightly, from the mornings open at 1.6026 down to 1.5993 by the close of the UK business day, putting further pressure on people buying Dollars. There was good news from the UK yesterday, with Halifax reporting that house prices rose by 1.2% in June, beating the previous month’s level of 0.4%. Prices also gained 0.7% for the 3 months to June, up from -4.2% up to 3.5%. It is a positive sign, but the UK housing market still remains weak, and it is this weakness that will be restricting the Bank of England from making any increases to the base interest rate, as a rate rise could see a large number of mortgage defaults, with household finances in the UK still being extremely tight.

Today has already seen the release of Industrial Production figures for May, which saw the figures report an increase in output month-on-month from levels of -1.7% up to 0.9%, which although a good improvement, was below market forecast for the figure to report at 1.1%. The main market event for the UK today will be the Bank of England’s interest rate meeting. It is almost certain that the base interest rate will not be changed, as the UK economy is still in a weak state. The housing market, along with the labour market are still under great pressure, and with the Government still to implement further austerity measures to try and reduce the UK’s debt load; it is not the most positive of outlooks.

The Euro slipped against the Pound and the US Dollar yesterday, ahead of the currency exchange market pricing in the almost certain possibility of the European Central Bank raising interest rates today. Also, ratings agency Moody’s cut Portugal’s credit rating to junk levels, and placed a negative outlook on the economy. The EUR/USD exchange rate fell from the morning’s open of 1.4375 down to 1.4321 by the close of play. The economic docket from Europe yesterday though showed a positive outlook, with German factory orders rising month-on-month from 1.8% up to 2.9% , and the annual level also rising from 10.6% up to 12.2%.

The day ahead will focus on the ECB’s interest rate decision. The foreign exchange market is widely-expecting another rise in the base rate, from the current levels of 1.25% up to 1.5%. The ECB has been issuing a strong rhetoric for the past few months, and despite fears that a rate rise could have some negative effects on periphery nations in Europe with weak markets and high borrowing levels, the bank look set to press ahead with another hike.

The Dollar did pull up slightly against both the Pound and the Euro yesterday, with ongoing uncertainty in UK and European markets possibly aiding the Dollar, as investors may be looking to move their money into the widely-regarded ‘safe-haven’ currency. The only real economic data of note yesterday from the US showed that ISM non-manufacturing figures dropped, from 54.6 to 53.3. It seemed though that the market took little reaction to the figure, with not much movement on the market on its release.

Today will see the release of ADP employment change figures for June, with the forecast for a rise from the previous month’s level of 38,000, up to 70,000. Should the figure come in line with expectations, it would be a positive sign for the US labour market, and would help contribute to the overall economic picture.

Mike Hood
KBRFX

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Foreign Exchange Daily Market Update 06/07/11

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The Pound managed to gain some ground against the Euro and the US Dollar in the foreign exchange market yesterday. The GBP/EUR rate opened at 1.1066 and pushed up throughout the day to trade at 1.1115 near the close. The GBP/USD rate also followed a similar pattern, moving up from the morning’s levels of 1.6021, to 1.6081 at the end of the UK business day. The jump in rates was good news for people who are buying Euro or buying Dollars. There was positive economic news from the UK, which may well have contributed to the rise, with PMI services figures showing the first rise in 3 months; the figure reporting an upturn in activity from 53.8 to 53.9.

Today has already seen some positive news from the UK’s economic docket, with Halifax house prices showing an increase of 1.2% for June; which is the biggest rise since October. Low interest rates combined with more people in employment has helped the housing market, and experts predict that if rates are kept low, we will continue to see improvement over the coming months, which is good news for the overall economic picture in the UK.

The Euro lost ground against the Pound and the US dollar yesterday. The EUR/USD rate fell from the open at 1.4478 to trade below 1.4406 at the end of the day. The economic news from Europe wasn’t positive; with the Euro-zone PMI composite figure showing a sharp decline, falling from 53.6 down to 53.3. Also, Euro-zone retail sales fell drastically, with the annual rate dropping to -1.9 from 0.8%, and the month-on-month level also slowing rapidly, the figure showing a drop from 0.7% down to -1.1%.

This morning will see the release of German factory order figures for May, which are forecast to show a sharp downturn, in both the monthly and annual rate. For an economy that relies heavily on industry, this will not be a good outcome for the Euro, and the currency exchange market could react sharply.

The Dollar recovered some ground against the Euro, but not against the Pound throughout yesterday. US factory order figures did show a sharp, unexpected jump, from -0.9% the previous month up to 0.8%. This news did see the GBP/USD rate pull back from above 1.6115 on its release, to 1.6081 at the close of the day. Through the early hours of the morning the rate has continued to pull back, but this could also be due to a cut in Portugal’s credit rating, with speculative traders buying Dollars to protect their risk exposure.

The US economic docket today will focus on ISM non-manufacturing figures, with the market forecast for a drop in levels, which would not be positive news for the currency.

Mike Hood
KBRFX

Foreign Exchange Daily Market Update 04/07/11

The Pound finished the week a lot lower against the Euro, but slightly higher against the US Dollar in the foreign exchange market. The GBP/EUR rate slipped from 1.1270 on Monday to trade at levels close to 1.1069 by the close on Friday, recovering slightly from a fall to 1.1008 in the earl hours of Friday morning; not good news for people buying Euros. The GBP/USD rate closed the week higher, at 1.6068 on Friday afternoon, up from the levels close to 1.5930 on Monday morning’ the rise in the rate being welcome news for consumers who are buying Dollars. Slight drops during the week for the Pound were not helped by the final reading of 1st quarter GDP showing that the annualised growth rate was revised downwards, from 1.8% to 1.6%, along with PMI manufacturing figures showing a slowdown in the sector, from a reading of 52.1 down to 51.3. Some positive notes were a slight increase in mortgage approvals, from 45,400 to 45,900 and also a small rise in house prices as surveyed by Nationwide, from -1.2% up to -1.1%.

The week ahead does contain some high-level market data from the UK, particularly Thursday’s Bank of England interest rate and asset purchase decision. While the market is expecting no change in either figure, any issued rhetoric form the bank could well affect the market, but any press comment is unlikely; with traders having to wait for the release of the banks minutes in due course for any viable commentary. Friday will be a big day for the currency exchange market as well, with the release of June’s GDP estimate from the National Institute for Economic and Social Research (NIESR). The growth rate is expected to be forecast at 0.4%, which would be down on the official final reading for the 1st quarter of this year, but is still a sign of growth nonetheless. Any drops below this predicated level could see the Pound weaken, as an economic slowdown will be detrimental to the value of the currency.

The Euro managed to find considerable strength against the US Dollar throughout last week, and gained well versus the Pound. The EUR/USD rate moved up to 1.4507 by Friday, after opening the week down at 1.4132. The market did take heart from the Greek Parliament passing a bill to implement medium-term austerity measures, which will help them gain access to funding from the IMF to prevent a default. German consumer confidence figures also showed an improvement in sentiment, along with the German labour market holding firm; the unemployment rate not dropping from the current level of 7.0%.

This week’s European economic calendar; like the UK’s, will contain an interest rate decision from the ECB. However, unlike the BoE, the ECB is widely expected to raise interest rates once again, up to 1.5% from the current level of 1.25%; which would be a bold move by policy-makers, and by all rights should help boost the strength of the Euro within the foreign exchange market. It could have a detrimental knock-on effect within Europe though, as a higher rate could see member states with heavy borrowing levels pushed to the limit in terms of repayments; something that official will be heavily aware of. Away from the ECB decision, the market will be looking to the release of Euro-zone retail sales figures on Tuesday, German factory orders on Wednesday, and German trade balance figures on Friday. With the first two releases expected to record drops, the Euro could come under pressure.

The US Dollar lost ground against both the other major currencies last week; with the economic calendar providing no support for the currency. Personal spending figures showed a drop in levels, from 0.3% to 0.0%, US consumer confidence also dropped significantly, from 61.7 down to 58.5; well below market forecasts. Also, the widely-regarded University of Michigan confidence survey which was released on Friday, showed a drop from 71.8 to 71.5, below analysts’ estimates, and may be considered by the market as an early indication of a slight economic slowdown in the US.

The US economic docket for this week could see the currency make big moves. There will be no data released on Monday, due to the US non-trading day for the 4th of July holiday. Tuesday will see factory orders figures released, with the market expecting a drop in levels. ISM non-manufacturing figures will report on Wednesday, with levels expected to drop as well, so the potential early in the week is for the US dollar to weaken. Thursday and Friday will focus on the US labour market; with Thursday seeing the release of the ADP unemployment change figures, and Friday seeing the release of the highly-volatile Non-Farm payroll figures along with the current US unemployment rate. The overall unemployment rate is forecast to stay at 9.1%, and non-farms are set to show an increase from 54,000 up to 89,000. The figure is prone though to produce big surprises, so expect the currency market to see some sharp movement on Friday afternoon.

Mike Hood
KBRFX

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 28/06/11

The Pound closed lower against the Euro, but higher against the US Dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate fell from 1.1270 to 1.1179 through the course of the day, putting pressure on UK consumers who are buying Euros. There was a welcome boost for people buying Dollars though, as the rate moved up from the morning’s low of 1.5930, to break the 1.60 barrier, before falling back slightly to 1.5975 by the end of the day.

There were no economic data releases from the UK yesterday to affect the movement of the currency. Today however will see the release of the final reading of 1st quarter UK GDP. With the quarterly growth rate expected to be confirmed at a level of 0.50% and annually at 1.8%, it is not an entirely impressive outlook for the UK economy, but better than any signs of a drop in growth, which would indicate an economic slowdown. Final figures for total 1st quarter business investment are also set for release, with the market forecasting no change from the previous reading of 3.2%. One figure that may give a positive boost to the Pound though is the UK’s current account balance reading for the 1st quarter; which is expected to see a reduction in the deficit from -10.5billion pounds to -4.7 billion pounds.

The Euro continued to find strength against the Pound and the US Dollar yesterday. The EUR/USD rate closed at 1.4279, a fair movement up from the morning’s level of 1.4134. The only low-level economic data to be released from Europe yesterday were figures showing that Italian hourly wages dropped slightly month-on-month, but held steady annually. The market was not really pushed by this news, as it doesn’t have any real bearing on the overall economic outlook for the Euro-zone.

Today has already seen the release of German GfK consumer confidence for July, which saw an upward movement in the reading, suggesting that sentiment across German society in regards to the economic outlook and their own personal spending is improving. There are a few figures of small economic importance to be released throughout the rest of the day, with Italian producer prices and French total jobseekers claims set for release. These figures though are likely to have little to no impact on the currency exchange market.

The Dollar weakened against the Pound and the Euro yesterday, and the economic docket did little to halt the slide. Figures released yesterday showed that personal income in the US has stagnated, at a level of 0.3%, while personal spending has dropped, from 0.3% to 0.00%, suggesting that wages are not increasing across the country, and regardless of this, consumers are holding onto their money; which is not good for the economy.

The market will focus on US consumer confidence figures that will be released today. The market has forecast a slight increase in consumer confidence, which would be positive for the US currency, as it would indicate a perceived improvement in business conditions, employment and personal spending.

Mike Hood
KBRFX

Foreign Exchange Daily Market Update 27/06/11

The Pound finished the week lower overall against both the Euro and the US Dollar in the foreign exchange market. The GBP/EUR rate fell from Monday’s high of 1.1374 down to the week’s low of 1.1168 on Wednesday; before recovering slightly on Friday to close the week out trading at 1.1264. The GBP/USD exchange rate also dropped over the course of the week. From the open at 1.6149, the Pound managed to pick up to a high of 1.6262 on Wednesday, before gradually falling away to 1.5941 by Thursday, and showing hardly any signs of recovery by the week’s end to trade at 1.5980. This was bad news for UK consumers who will now find an increased cost when it comes to buying Euros and buying Dollars.

The economic docket from the UK last week offered no real positive signs for the economy, hence the poor performance of the currency. On Tuesday it was revealed that the amount of money the UK Government had put into public sector finances had increased for the month of May, up from the previous month’s figure of 3.5 billion pounds, to a level of 11.1 billion pounds. Public sector net borrowing also increased, from 7.7 billion pounds to 15.2 billion pounds; a sure sign that the private sector is failing to pick up the slack left by public sector cuts, so the government needs to divert more funds into the coffers to prevent a knock-on effect to economic growth prospects. The Bank of England released the minutes from their last policy meeting on Wednesday, with the Pound taking a sharp downturn as the results showed that the vote to keep interest rates on hold was by a larger margin than the previous meeting. The vote shifting from a 6-3 margin to a 7-2 majority in favour of holding the current rate, and the vote to keep asset purchasing at its current level was at an 8-1 majority. This really rocked the market, and almost counts out any chance of rate hike this year. Thursday did offer a slight positive, with BBA loans for house purchases showing a monthly increase from 29,747 up to 30,509, but it did little to affect the Pound’s slide.

The week ahead does have some high-level market data for the UK, the most notable being Tuesday’s final reading of 1st quarter GDP. The market is predicting no changes in the final reading, with the quarterly growth rate at 0.5%, and the yearly rate at 1.8%. Should there be any revisions though, either to the up or downside, the Pound could see a strengthening or weakening dependent on the outcome. Wednesday will see mortgage approval figures releases, with the market expectation to see a rise in the number of approvals from 45,200 to 46,300, which would be a positive sign for the UK’s housing market. On Friday the currency exchange market will focus on PMI manufacturing data, which is set to see a slight increase, and could benefit the Pound, by showing a positive contribution to the overall economic picture.

The Euro strengthened considerably against the Pound throughout last week, but fell against the US Dollar. An agreement in principle to a bail-out for Greece, along with the Greek Prime Minister George Papandreou surviving a vote of confidence, the market may well be taking heart from the solidarity being shown by the Euro-zone; despite whisperings of unrest from senior officials. The currency was buoyed on Tuesday with European Commission President José Manuel Barroso insisting that Greece will ‘never’ be allowed to go bankrupt.

Economic data across the course of last week offered a mixed picture for Europe; the German producer price index showed a drop month-on-month, from 6.4% to 6.1%; a negative sign for a country that that relies heavily on industry. The German ZEW economic sentiment survey also showed a drop for June, indicating that financial experts across Germany are less confident in current market conditions. This was echoed in Wednesday’s Euro-zone consumer confidence survey, which also showed a drop, from a level of -9.9 to -10.0, showing that any market doubt is also reaching consumers. Wednesday also showed that Euro-zone industrial new orders fell from 14.3% to 8.6%. The negative outlook was somewhat reversed on Friday though, with the German IFO survey showing an increase in business climate sentiment, and current assessment of the economic picture.

This week’s European economic docket will be watched closely by traders, with the possibility of some surprises. Wednesday will see annualised German CPI figures released, with the market pricing in a slight improvement, from 2.4 to 2.5%, which could boost the Euro currency. Also on Wednesday, Euro-zone consumer confidence is forecast to hold steady at a level of -10.0, which is not overly positive, but any lack of a decline is welcome. Thursday will focus on German unemployment, with the overall rate set to hold firm at 7.0%, no improvement, but again showing no decline, which the market may view positively.

The Dollar gained considerable ground against the Pound and the Euro over the course of the week. The EUR/USD exchange rate coming down from the weeks high of 1.4439 on Wednesday, to a low of 1.4126 by Thursday, coupled with the drop in the GBP/USD rate down to under 1.60.
The Dollar’s gain was definitely helped by a positive economic docket fro the week. The market taking heart from the news that existing home sales reported better than expected at 4.81 million for the month, down from the previous month’s level of 5.00 million, but beating analysts estimates. Continuing claims fell from 3,698,000 to 3,697,000, showing a reduction in the number of jobless claimants; a positive sign for the US labour market. Durable goods orders also increased for the month of May, showing an impressive increase; up from -3.6% to record a positive result of 1.9%, way beyond the market forecast.

The US economic docket for the week ahead may not be as positive overall, with Monday’s personal income figures set to hold steady, and personal spending for US consumers set to decline; not a good sign for the overall economy. The market has forecast a positive rise in US consumer confidence, which is set for release on Tuesday, along with the University of Michigan’s confidence index also set to show a positive increase when released on Friday. However, ISM manufacturing is forecast to decline on Friday, from the previous month’s level of 53.5, down to 51.5, which may put a dampener on any gains seen by the currency.

Mike Hood
KBRFX

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 20/06/11

The Pound closed the week lower against the US Dollar, but higher against the Euro. After the GBP/USD peaked at a high of 1.6440 on Wednesday; a combination of poor UK economic data and some positive signs from the US’s economic docket, the rate fell to 1.6142 on Friday, making it more expensive for UK consumers who are buying Dollars. The GBP/EUR rate hit a mid-week high of 1.1456 in the early hours of Thursday morning, giving a boost to UK consumers buying Euros; but despite some serious troubles in Europe, The Pound failed to hold its gains and slipped back to trade just below 1.13 in the foreign exchange market by the close of play on Friday.

The major disappointments on the UK’s economic docket last week were from the retail and jobs markets. Jobless claims increased by 19,600 for the month of May; way beyond analysts’ estimates, painting a dour picture for the UK’s labour market. UK Retail Sales also fell, both month-on-month and annually, marking a sharp drop in consumer demand which will also affect overall economic growth. Any hopes of increased inflation pushing the Bank of England into a rate-hike were also pretty much wiped out last week, with UK CPI figures reporting a marked slow-down in price growth month-on-month. The CPI figure showed growth had slowed fairly rapidly, dropping from levels of 3.7% down to 3.3%. While the level remains above the Bank of England’s target, it does support the view from the IMF and some senior economists that inflation will fall naturally over time, and the current level does not justify a tightening of monetary policy.

The economic docket from the UK this week does contain some high-level market data. Tuesday will see the release of Public Sector Net Borrowing and Public Sector Finance figures for May; and the currency exchange market will be watching to see if the UK Government is sticking to its pledge of implementing deep cuts to try and restore the UK’s balance sheet to respectable levels. The Bank of England will release the minutes from their last policy meeting on Wednesday, and this is sure to be on of the key releases of the week. The minutes will be studied closely for any signs of a shift in rhetoric; and the all important voting numbers. The British Bankers Association (BBA) will publish its figures for loans for house purchases on Thursday; any improvement in the UK’s housing market will be beneficial to overall sentiment, and possibly the currency. The CBI will also release their figures for reported sales for June on Thursday, and that will be the last piece of data for the UK this week.

Europe continues to face strong headwinds from the as yet unsolved bail-out situation in Greece. Euro-Zone finance ministers are continuing to try and push through a plan which could see Greece receive up to 20 billion Euros in financial aid. While the situation remains unresolved, the currency is open to movement in the foreign exchange market, but over the past week still managed to hold firm against the Pound and the US dollar.

The past week saw Greece’s credit rating cut to ‘CCC’, and in what could be a slight blow to increased rate-hike expectations in Europe, Euro-Zone CPI figures reported a sharp pause in growth month-on-month, and a slight drop in the annual inflation rate. With the ECB widely expected to push on with a tightening in monetary policy, a slow in the inflation rate does add fuel to the fire that a further rate-hike, whilst beneficial to the currency, could start to be ‘damaging’ for overall economic growth across the Euro-zone.

The week ahead for Europe contains a lot of economic data. Tuesday will see the results of the ZEW survey on economic sentiment for June; with the figure having the potential to influence the direction of the currency should there be any major drop or increase in sentiment. The focus will again be on opinion and market sentiment on Wednesday, with the release of Euro-zone consumer confidence. In light of the current issues in Europe, the market will look to the effect that this has had on consumers, and will be an indication of future market trends. Thursday will focus on PMI figures, from France, Germany, and the overall Euro-zone. These figures will be closely watched by the market, any sharp drops could well weaken the Euro. Friday will see German retail sales figures released, along with the GfK consumer confidence survey for July.

The US Dollar peformed fairly well across the course of last week. The economic docket provided great support for the currency, with mostly all the market data released throughout the course of the week indicating a positive outlook for the US economy.

Retail Sales figures were up, beating analyst’s estimates. Producer Prices rose sharply from 6.8% up to 7.3%, along with building permits and housing starts showing good gains. Jobless claims fell for the month of May, showing that the US labour market is making a marked recovery. One of the big figures of the week was the CPI index. The figure showed that price growth increased annually; up from 3.2% to 3.6%, which is positive for the overall economy, and may indicate to the Federal Reserve that should there be a contained sharp rise in inflation, it could be time to start looking at tightening monetary policy, which would benefit the US dollar.

The US economic docket for this week will start with Tuesday’s existing home sales figures. This will give an insight into the health of the housing market in the US, and an upward movement would be positive for the currency. Wednesday will be a major day for the Us economy, with The Federal Reserve announcing their interest rate decision for the month, but with the market widely predicting no change; it will be the accompanying press conference that is watched closely for any shift in rhetoric from policy makers. Thursday will see the market focus shift back to housing, with new home sales figures set to report a slight drop. The economic week will close with durable goods orders figures reporting on Friday, and with analysts expecting a sharp increase, the US Dollar could well close the week with a sharp boost.

Mike Hood
KBRFX

Foreign Exchange Daily Market Update 17/06/11

The Pound opened and closed almost unchanged against both the Euro and the US Dollar in the foreign exchange market yesterday. Despite a slight fall in the middle of the day, GBP/USD opened at 1.6142, and closed around 1.6128, with GBP/EUR opening just shy of 1.1420 and closing at levels of 1.1396. There was only one key set of figures on the UK’s economic docket yesterday, and that was Retail Sales result for May. The core result was a drop, both month-on-month and annually; falling from 1.1% to -1.6%, and from 2.3% to 0.00% respectively. This can be viewed as a negative sign for the UK, as it shows a drop in consumer demand, and consequently, a potential slowing in economic growth.

Turning to today’s UK economic docket, there are no figures set for release; which leaves the Pound open to movement in the currency exchange market based on news events and data from the world’s other major economies.

The Euro held firm against the Pound and The US Dollar yesterday, albeit after a heavy drop against the Pound in the very early hours of Thursday morning. Market expectations for a rate-hike in Europe may have been dealt a slight blow yesterday, with the release of Euro-zone CPI figures. The figures showed that the risk of inflation has dampened slightly; the core index reading showing that price growth dropped from 1.6% to 1.5% month-on-month, and fell slightly from 2.8% down to 2.7% annually. While the figure still remains above the ECB’s target level, it may be an indication to the market that the heightened levels are temporary, and do not require a tightening of monetary policy.

While the delicate situation regarding a potential bail-out for Greece continues, the Greek Prime Minister George Papandreou appointed current Defence Minister Evangelos Venizelos as his new finance minister and deputy prime minister in a government reshuffle yesterday. Traders will be watching the situation closely, with Germany being one of the most likely member states to push for an immediate solution.

The economic docket for Europe today will focus on the Euro-zone trade balance results for April. Should the figures show a swing towards exports outweighing imports in the Euro-zone (a trade surplus) it would have the potential to provide some buoyancy to the Euro, as it would show an increased flow of funds into Europe. If the Euro was to start finding some strength, it would start making it more expensive for UK consumers that are buying Euros.

The US Dollar held steady yesterday, after making huge gains against the Pound on Wednesday, the GBP/USD rate staying at mid 1.61 levels throughout most of Thursday. The huge drop on Wednesday down from 1.6430 has suddenly made it more expensive for UK consumers buying Dollars. The US economic docket yesterday did show some encouraging signs for the economy – building permit figures showed an increase, up from 563,000 to 612,000. Housing starts were also up, from 541,000 to 560,000. The labour market received a welcome boost when figures showed that initial jobless claims fell month-on-month, down from 430,000 claims to 414,000 claims.

Today’s US economic docket will focus solely on the University of Michigan’s confidence survey for June. The figure is considered to be one of the foremost indicators of consumer sentiment in the US, and any drop is usually considered an early indicator of economic downturn. Analysts are predicting a slight drop, from 74.3 to 74.0, but this may not be a large enough swing to hurt the US currency too much.

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

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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.

Foreign Exchange Daily Market Update 14/06/11

Monday's economic docket from the UK was extremely light; however this did not stop the Pound from making some headway against the US Dollar. The GBP/USD exchange rate picked up to a high of 1.6343 by 14:00 BST, making it cheaper for people who are buying Dollars; before heading back towards 1.63. The currency pair received a boost following the release of the Bank of England's (BoE) quarterly inflation report in which the central bank's Chief Economist Spencer Dale said that long-term inflation expectations remained stable. However Dale went onto say that shorter-term inflation expectations were more difficult to gauge and remain "a key area of concern".

May's inflation figures take precedence on the economic docket today, with the headline figure expected to post an annualised growth rate of 4.5% in May, unchanged from April's reading. The core index is expected to show a slight slowdown in price growth, at 3.5%, down from 3.7%. With inflation expected to remain unchanged from the previous month, the BoE is unlikely to face any further pressure to raise interest rates. Even if inflation grew at a faster than expected pace; a result that would usually see increased talk of an interest-rate hike to curb 'dangerous' levels of growth, the currency exchange market is unlikely to react as the BoE has already received support from the International Monetary Fund (IMF) for its choice of appropriate monetary policy, and the view that above-target inflation in the UK is temporary. With rate expectations falling, the Pound could face headwinds and subsequently trade lower against the other major currencies.

In light of on going sovereign debt fears, the Euro managed to end a three day decline against the US Dollar, much to the surprise of foreign exchange traders. The EUR/USD exchange rate managed to push through to 1.44 despite the European Central Bank (ECB) President Jean-Claude Trichet and German Finance minister Wolfgang Schaeuble being unable to agree on the role in which investors will play in the Greek bailout, with Schaeubles pushing for creditors to pay some of the cost, while Trichet believes this could be an enormous mistake. While the disagreement remains unresolved the IMF has threatened to withhold its share of Greece's original bailout package. Such an outcome would be hugely detrimental to Greece and could very well shake up the whole European economy. Adding salt to the wound, credit ratings agency Standard and Poor's lowered Greece's credit rating from B to CCC given the increase likelihood of the nation defaulting on its debt. While the Euro continued to be uninhibited by this news when it came to the US Dollar, the same wasn't true of the GBP/EUR exchange rate which hit 1.1362 at the open of the US session.

Today the European docket will be almost entirely empty of meaningful economic data, but that doesn't mean that the day will be uneventful. Given the threat that the IMF gave on withholding part of Greece's bailout package, European finance ministers have called for a special meeting to be held. If a compromise is reached then the Euro could well rally as the outlook for the region improves. However, failure to reach a suitable agreement could put serious pressure on the Euro, and make the currency exchange rate more favourable for buying Euros.

The three day rally that the market saw on the US Dollar at the end of last week came to a stop on Monday. A lack of meaningful data on the US docket meant left the currency open to risk sentiment, and consequentially the currency traded lower against the other majors as traders regained their appetite for risk. The Dollar made its greatest losses against the Japanese Yen and the Swiss Franc, while the US Dollar was down 0.19% against the Canadian Dollar during the Asian session as well as being down against the Australian and New Zealand Dollars.

This afternoon's session could see the Dollar extend its losses as May's advance retail sales are expected to contract by 0.5%, a sharp reversal compared to April's 0.5% increase. Further to this, interest rate hike expectations are likely to fall given that the month-on-month reading for the US Producer Price Index is expected to slow from 0.8% in April to 0.1% in May.