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 09/10/12

Yesterday saw the Pound weaken against the Euro and the Dollar in the foreign exchange market. The GBPEUR opened at 1.2389, a day high but fell throughout the day to close at a low of 1.2354. The GBPUSD rate followed a similar pattern with it opening at 1.6093 and slipping down to 1.6031 by the close of trade. Yesterday saw no information coming out of the UK.

Today will be a busy day however for UK data release, with some information having already been released such as the RICS house price balance for September which rose from the previous result of -18% to -15% showing surveyors are still reporting a loss but at an increasing rate. BRC sale, like-for-like, have also been released this morning with the result increasing by 1.5% even though the expected result was set to decrease by 0.2%. Industrial and manufacturing productions have been released and both came out with worse results than previous months, -1.1% and -0.7% respectively. NIESR GDP estimates are set to be released later with it set to increase by 0.2%, with positive results generally bullish for the Pound.

The Euro gained strength against the Pound but lost some against the Dollar during yesterday’s market session. The EURUSD opened at a high of 1.2988 but slipped down to 1.2937 early afternoon before closing slightly higher at 1.2988. Yesterday saw German trade balance falling from 19.6B to 16.3B, a major figure in the Euro-zone as Germany is Europe’s largest economy and renown for exporting so lower results can put pressure on the Euro. The other major information that has already come out of the Euro-zone yesterday was the Sentix investor confidence, improving slightly from -23.3 to -22.2 showing a greater amount of confidence in the Euro-zone.

One of the main reasons for the Euro weakening is because Mario Draghi will speak in front of the Committee of Economic and Monetary Affairs of the European Parliament where it is predicted he will say that difficult times are still ahead and that Euro area leaders should carry on implementing the necessary fiscal reforms in order to protect the economy and that we should not lose confidence in the Euro. German Chancellor, Angela Merkel is set to meet with the Greek government in Athens today to discuss the necessary austerity cuts and other ways to save the Greek economy.

The Dollar gained strength against both the Pound and the Euro yesterday despite no data being released from the US. Today will also see no data being released.

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 13/09/11

Follow us on Twitter! @KBRFX


The Pound remained relatively unchanged against the US Dollar during yesterday's trading session leaving conditions less than ideal for buying Dollars. The foreign exchange market bared witness to some choppy trading as the Pound slipped to an early morning low of 1.5790, against its US counterpart, before climbing to its afternoon high of 1.5886. As the European market drew to a close, the GBP/USD exchange rate fell to the day's low of 1.5771 before climbing back to 1.5853 by the close of the US market. Despite a lack of meaningful economic data from both Britain and the Continent, the Pound lost ground against the Euro to see the GBP/EUR exchange rate fall from its high of 1.1714 to 1.1574, however the market was still favourable for buying Euros.

This Tuesday the UK is scheduled to see August's Consumer Price Index (CPI) announced with expectations calling for an annual increase from 4.4% to 4.5%. The predicted outcome could potentially bolster the Pound's trading power against the other currencies. Along side the CPI's release, July's visible trade balance figures are expected to show that the UK's trade deficit has shrunk since June. Just like with the release of the CPI reading, the Pound could gain strength if trade deficit narrows in line with expectations.

The Euro gained ground against both the British Pound and the US Dollar during Monday's session, with currency exchange market seeing the EUR/USD exchange rate picking up from 1.3554 to a high of 1.3694. The Euro's reversal could be attributed to ECB President Jean-Claude Trichet's comments following the Global Economy Meeting held in Basel, Switzerland. The European Central Bank (ECB) President gave a show of strength when he announced that European central banks were "united" in guarding against inflationary and deflationary risks. He also stated that all Europeans "expect the Greek government to fully deliver on its commitments," and added that there is "superior interest" in observing that satisfactory results take place in Greece.

So far this morning, the Euro retraced some of its gains against the Pound to see the GBP/EUR exchange rate rise above 1.16, while against the US Dollar the exchange rate slipped to 1.3597. The Euros decline could be attributed to the better than expected growth rate in the French CPI reading for August. Normally higher CPI readings would be positive for the currency but considering that the ECB is has indicated that it may look to slash interest rates, price growth would only be a hindrance to the region.

With little economic data out from the US on Monday, the Dollar remained unchanged against the Pound, although the currency pair did test the lower ranges twice on Monday, but this was short lived as the exchange rate corrected itself to levels above 1.58. The same could not be said for the Dollar's performance against the Euro which overpowered the Dollar to see the Euro rate make gains.

Looking ahead the most significant piece of data to come out from the US will be August's Monthly Budget Statement which economists forecast to increase from a budget deficit of $90.5 billion to $132 billion. The outcome will likely have a negative impact on the US Dollar when the data is released at 19:00 BST.

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

Foreign Exchange Daily Market Update 12/09/11

Follow us on Twitter! @KBRFX

The Pound finished last week having managed to make an impressive gain against the Euro in the foreign exchange market; but having fallen heavily against the US Dollar. The GBP/EUR exchange rate which opened the week at levels of 1.1413, stayed fairly range-bound until Thursday’s Bank of England and European Central Bank (ECB) meetings. Following an extremely dovish outlook from the ECB, the Pound took full advantage of Euro-weakness and the exchange rate moved up rapidly, closing on Friday at 1.1617. Aside from the Bank of England’s expected decision to keep rates and asset purchases on hold; the overall picture from the week’s UK economic data was negative though. PMI services data showed a downturn in August, from 55.4 to 51.1; Industrial and Manufacturing production both dropped annually, and producer price index figures showed no change annually, but a drop monthly from 0.3% to 0.1%.

The week ahead does contain a few pieces of high-level market data from the UK. Tuesday will see the release of CPI (inflation) figures, with the market forecast for price-growth to have increased, both annually and month-on-month; which could potentially put the Bank of England in a difficult position in terms of interest rate policy. Sustained levels of inflation would put pressure on the central bank to raise rates; but with the economy still in a fragile state, and the central bank’s continued view that the current levels are temporary, it will be interesting to see how the market reacts. Wednesday will put the UK’s labour market under close scrutiny, with the release of jobless claims change for August, along with the latest claimant count rate figures, and the latest snapshot of the headline UK unemployment rate. Thursday see’s retail sales figures cross the wires, with the week closing out with Friday’s earl morning consumer confidence figures. The Pound does have the potential to continue its drive against the Euro this week; but is more likely to be stoked by increased turmoil and worsening sentiment in the Euro-zone as opposed to large amounts of positive data from the UK.

The Euro took a hammering in the currency exchange market last week, losing huge ground against both the Pound and the US Dollar. There were a number of negative data releases from Europe, namely a downward revision in Euro-zone 2nd quarter GDP from 1.7% to 1.6%, and hugely disappointing factory orders data from Germany. Figures from Germany also showed a drop in the nation’s trade surplus; indicating a slow-down in export activity; which could be attributed to an overly-strong currency, a possible damaging effect of overly-strong policy and rate-hikes from the ECB over the previous months. The biggest risk event though for the Euro was the ECB’s interest rate meeting on Thursday, at which the ECB President Jean-Claude Trichet took a hugely dovish stance; highlighting the downside risks to economic growth, with a shift in over-night index swaps indicating the market now expects the central bank to make rate-cuts by the end of the year. The currency suffered instantly, the EUR/USD exchange rate moving from the week’s open at 1.4141 down to 1.3649 y Friday’s close; following the rate meeting.

This week will see hardly any data from Europe cross the wires; but there is still potential for the data to affect the market heavily. Euro-zone industrial production figures will be released on Wednesday, with any further drop in levels set to increase the pressure on the currency. Thursday will be a major day in terms of risk; with the release of Euro-zone CPI (inflation) figures for August, and also the ECB will publish its latest monthly report. Any rise in price-growth will put pressure on the ECB; which is in no position to make further rate–hikes to control inflation. The ECB’s monthly report is likely to give more insight into policy-makers views on current economic conditions, and the outlook for next few months. The Euro is facing headwinds already this morning with news crossing the wires that Germany’s Chancellor Angela Merkel is set to pass comment on the current Greek debt situation; and the media expectation being that the nation (Germany) is growing increasingly tired of bailing-out weaker nations, and that Germany may be set to ‘wash it’s hand’ of any involvement; which would be disastrous for the Euro-zone.

The US Dollar continued to benefit heavily from turmoil in Europe last week, gaining across the board; its status as a safe-haven currency helping to push the GBP/USD exchange rate back down from the week’s open at 1.6142 to 1.5857 by Friday afternoon. Risk sentiment was the main driver for the Dollar; with minimal economic data crossing the wires from the US during the week. ISM non-manufacturing figures for August showed a slight increase in activity from 52.7 to 53.3, and US trade balance figures showing a decrease in the nation’s trade-deficit. The release of the Federal Reserve’s beige book economic survey showed little in terms of positive news, with most of the Fed’s twelve districts reporting distinctly average conditions for retail sales and housing, with some districts showing contractions in activity.

The US economic docket will see some significant data released this week. Tuesday will see the US’s monthly budget statement cross the wires, followed by the market-moving advance retail sales figures on Wednesday, along with business inventories and producer price figures. Thursday will focus on price-growth, with the release of the latest CPI (inflation) figures, as well as industrial production, and the latest Philadelphia Fed Index. The week will round off on Friday with the University of Michigan confidence survey; with the overall market view for the Dollar to maintain it’s gains amongst what will be a turbulent week for Europe.

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

Foreign Exchange Daily Market Update 02/09/11

Follow us on Twitter! - @KBRFX

View this on our website?

The Pound continued to fall against both the Euro and the US Dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate fell from 1.1347 at the mornings open down to 1.1328 by the days close. The GBP/USD exchange rate followed a similar pattern to the previous day, with a large slide from 1.6230 down to 1.6170 throughout the day. The economic data released from the UK yesterday was disappointing; with Nationwide house prices for August stagnant at -0.4% amid market forecasts for an increase to +0.4%, further enhancing the fragile state of the UK’s housing market. The manufacturing sector also disappointed; with the PMI manufacturing index for August falling from 49.4 to 49.0.

There are no scheduled data releases from the UK today, leaving the currency open to shifts in risk sentiment and news from the world’s other major economies.

The Euro again lost ground against the US Dollar, but gained slightly against the Pound. The EUR/USD exchange rate fell from 1.4301 down to 1.4276 across the day, the single-currency coming under fierce pressure amid a fairly poor economic docket; with 2nd quarter German GDP showing no change in the previous reading, the n.s.a growth rate level at 2.8%, and the w.d.a figure at 2.7%. German PMI manufacturing for August fell, from 52.0 to 50.9, with the Euro-zone PMI manufacturing index also falling, from 49.7 to 49.0.

Today will see the release of German PPI figures; with the market forecast for prices to rise both annually and monthly; which may not be a positive result for Europe, as rising producer prices are a good early indicator of rising inflation, which the ECB is determined to keep suppressed. With the current fragile overall economic state of the Euro-zone, rising inflation would be a serious issue, with the ECB having little room to be able to raise interest rates further after having done so twice this year already.

The US Dollar continued to show good gains in the currency exchange market, against both the Euro and the Pound; despite slightly disappointing economic data, with ISM manufacturing and prices paid for August both falling, from 50.9 to 50.6 and from 59.0 to 55.5 respectively. The currency has been finding strength on two fronts; as a safe-haven currency for investors with deep-rooted worries over the current burgeoning debt problems across Europe, and the fact that it seems almost certain that the Federal Reserve will be undertaking further monetary stimulus to boost the nation’s fragile economy.

This afternoon could see the US Dollar make sharp movements in the market, with the highly volatile Non-farm payrolls report for August. The market forecast; albeit often way off the mark, is for a drop in the reading, from 117,000 to around 65,000; which would be negative for the Dollar; but as is often the case, a revision of the previous month’s figure, and a large surprise in the current month’s level could see the currency fluctuate rapidly upon the data’s release.

The Market Team at KBRFX - www.twitter.com/kbrfx

Found this useful?

You can receive Foreign Exchange Daily Market Updates directly to your e-mail inbox, completely FREE!

Foreign Exchange Daily Market Update 31/08/11

Follow us on Twitter! - @KBRFX

View this on our website?

The Pound lost ground against both the Euro and the US Dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate fell from the mornings open at 1.1310 down to 1.1281 by the days close. The GBP/USD exchange rate showed a much deeper decline though, falling from 1.6380 to 1.6276 by the end of the day. The sole piece of economic data released from the UK yesterday however, was positive; with mortgage approvals for July showing a marked improvement, up from 48,500 approvals to 49,200; which is positive for the housing market.

There are no scheduled economic events for the UK today; so the currency will be open to shifts in risk sentiment and market data from the world’s other major economies.

The Euro made a small advance against the Pound but fell slightly against the US Dollar yesterday. The currency didn’t really receive any boosts from the economic data that was released yesterday, with Euro-zone consumer confidence figures for August showing a minimal improvement, from -16.6 up to -16.5, the index reading still at levels that are the lowest since 2008. Euro-zone business climate indicator figures were also poor, with the reading falling from 0.44 to 0.07, showing an increasingly negative outlook from industry leaders towards current conditions and the state of the overall economy.

This morning has already seen the release of numerous figures form Europe; with German retail sales showing a slight increase annually, from -2.1% to -1.6%, but falling month-on-month, from 4.5% down to 0.0%. Germany’s labour market has come under close scrutiny with the unemployment rate holding firm at 7.0% for August, and the unemployment change showing the labour market lost less jobs, -8,000 as opposed to the previous month’s revised level of -10,000. Later today we will see the release of Euro-zone CPI (inflation) estimates, and also the latest Euro-zone unemployment rate. The currency could come under pressure if there is any disappointment in either figure.

The US Dollar made good gains against both the Euro and the Pound yesterday, despite a huge fall in US Consumer Confidence for August. The EUR/USD exchange rate pulled back from 1.4481 at the morning’s open, to 1.4426 by the day’s close, in spite of the consumer confidence figure plummeting from 59.2 down to 44.5, with the currency exchange market pricing in a level of around 52.0. The drop though, does add fuel to speculation that the Federal Reserve may look to start pressing on with further economic stimulus to prevent the nation falling into a double-dip recession. The release of the minutes from the Federal Reserve’s last policy meeting last night backed this up; with three out of 10 voting officials disagreeing with chairman Ben Bernanke's decision to announce he plans to keep rates close to zero for another two years. Details of the minutes showed that some officials favoured far bolder action than that taken, arguing for a third round of asset purchases (quantitative easing). The minutes stated that "A few members felt that recent economic developments justified a more substantial move, with participants noting deterioration in labour market conditions, slower household spending, a drop in consumer and business confidence and continued weakness in the housing sector."

Today will see the ‘deteriorating’ US labour market come under close scrutiny, with the release of ADP employment change figures for August; with the market forecast for a slight decrease in the number of jobs added, from 114,000 down to 103,000. Traditionally, any signs of weakness should see a currency fall in value, but as with yesterday’s market movements it may well be that the negative data is only serving to increase the likelihood of monetary stimulus from the Federal Reserve, which in the long term should benefit overall economic growth. Factory Orders figures for July will also cross the wires this afternoon, with the market forecast for a positive increase in the index reading.

The Market Team @ KBRFX - info@kbrfx.com

Found this useful?

You can receive Foreign Exchange Daily Market Updates directly to your e-mail inbox, completely FREE!

Foreign Exchange Daily Market Update 15/08/11

View this on our website?

The Pound ended last week lower against the Euro and the US Dollar in the foreign exchange market. The GBP/EUR rate opened on Monday at 1.1440, falling to a low of 1.1253 during the week before recovering to trade at 1.1436 by the close on Friday. The GBP/USD rate followed a similar pattern, opening at 1.462 on Monday, which was the highest point of the week; falling to 1.6110 before coming back to trade at 1.6280 by Friday’s close. The main economic events of last week in the UK saw industrial production rise, from -0.9% to -0.3%, manufacturing production fell; from 2.8% down to 2.1%, and the UK’s trade balance widened, from -£8.467 billion to -£8.873, reinforcing the nation’s reliance on imported goods and poor export levels. Wednesday saw the Bank of England release their latest inflation report, with the bank taking a very dovish stance towards policy. Governor Mervyn King indicated that he expects inflation to fall back below the bank’s target level of 2.00% in the medium-term, and that they have cut their growth forecasts because of weakness in the global economy, citing the Euro-zone debt crisis as a possible dampener to the UK’s economic prospects. Many market experts are now predicting that the bank may not start raising interest rates until well into 2012, and this could be a possible reason that the Pound lost ground against the Dollar.

The week ahead will see some high-level market data from the UK, with Tuesday seeing CPI (inflation) and retail price index figures cross the wires. Wednesday will be focused heavily on the release of the minutes from the Bank of England’s last policy meeting; with the currency exchange market almost certain to take direction from any shift in the central bank’s voting majorities or stance on monetary policy; alongside the release of the jobless claims change, and unemployment rate figures for July. Thursday will see the release of retail sales figures, with the market forecast for a drop in sales, which could be detrimental to the pound; as lower consumer spending can be an early indication of economic slowdown. The week will round off on Friday with the release of public finance figures and public net borrowing levels; which are both expected to see a sharp drop, courtesy of government cuts, which in a way will be welcomed as the UK tries to trim its balance sheet, but could have a detrimental effect to the overall economy.

The Euro did suffer in the market last week, ending lower against the US Dollar but regaining some of its earlier losses against the Pound. The week saw a fairly negative picture in terms of economic data from Europe; with Euro-zone investor confidence falling sharply from 5.3 to -13.5, Germany’s trade balance also fell, with the positive surplus contracting from 14.8 billion Euros to 12.7 billion. German CPI (inflation) held its annual level at 2.4%, and French 2nd quarter GDP fell drastically; the annual rate falling from 2.2% to 1.6%, and quarter-on-quarter from 0.9% to 0.0%. There was quite a big focus on the European Central Bank’s monthly report on Thursday; with the central bank indicating that that the last two rate-hikes; whilst questioned by some in the market were warranted, given the upside risks to price stability. The report enhances the bank’s stance towards inflation; that they aim to keep price-growth close to 2.0%, which in turn they believe will support economic growth and job creation in the Euro area. The rhetoric is that the bank will keep policy ‘accommodative’ to support its aims, and will ‘monitor very closely all developments with respect to upside risks to price stability’.

This week will see the release of German and Euro-zone GDP figures on Tuesday, with the market primed to pile further pressure on the Euro should growth levels stall; or even worse fall below current levels. Wednesday will see the release of Euro-zone CPI (inflation) figures, with the market forecast for no change in either the core or overall level, which would suggest that the ECB’s previous two rate-hikes have served to contain inflation. The week will conclude on Friday with the release of German producer price index levels, with the annual rate expected to fall from 5.6% down to 5.3%, and the monthly figure to have stalled at 0.1%, which will not be positive for the single-currency.

The US Dollar managed to show a positive gain against both the Pound and the Euro throughout last week. The EUR/USD rate showed a shift in positive sentiment towards the Dollar across the week, the exchange rate coming down from Monday’s open at 1.4356 to trade at 1.4235 by the close on Friday. During the week, the Dollar did suffer slightly, with the Federal Reserve keeping the base rate on hold, and indicating that it may not consider altering the rate until well into 2013. The monthly budget statement released on Wednesday showed that the US’s negative balance was reduced slightly, from -$165 billion to -$129.4 billion, a positive sing; but this was countered by Thursday’s trade balance figure showing an increase in the US’s trade deficit; from -$50.8 billion to -$53.1 billion. The week ended on a negative note, with the university of Michigan survey showing a sharp decline, from 63.7 down to 54.9.

The US economic docket this week will see some significant data, with Tuesday seeing building permits, housing starts, and industrial production all reporting. Wednesday will see Us producer price figures cross the wires, with the market forecast for no change in the current level of 7.0%. Thursday is a data-heavy day, with CPI (inflation) figures set to report, and the currency will be sure to take direction from an expected drop in price-growth. There will also be existing home sales figures released on Thursday, with no data set for release on Friday.

The Market Team @ KBRFX

Website
Twitter

Foreign Exchange Daily Market Update 11/08/11

View this on our website?

The Pound made good gains against the Euro, but fell slightly against the US Dollar in the foreign exchange market yesterday. The GBP/EUR rate moved up from the morning’s open at 1.1307 to 1.1394 by the end of the day; however, the GBP/USD exchange rate dropped throughout the day, from 1.6258 down to 1.6179. The main economic event in the UK yesterday was the Bank of England’s inflation report; with the bank taking a very dovish stance towards policy. Governor Mervyn King indicated that he expects inflation to fall back below the bank’s target level of 2.00% in the medium-term, and that they have cut their growth forecasts because of weakness in the global economy, citing the Euro-zone debt crisis as a possible dampener to the UK’s economic prospects. Many market experts are now predicting that the bank may not start raising interest rates until well into 2012, and this could be a possible reason that the Pound lost ground against the Dollar.

Today will see the release of the Nationwide Consumer Confidence report from the UK, with any sharp drop in the reading likely to affect the currency. The report will give an insight into areas of worry for consumers, and their assessment of the current economic situation.

The Euro fell against the Pound and the US Dollar yesterday, with the currency exchange market seeing a shift away from the single-currency as there is still a feeling amongst many experts that despite the ECB’s purchase of Spanish and Italian securities, there is a possibility that should one of the nations start to struggle with increased debt loads, there may not be enough funding available to bail them out. The only economic data of note from Europe yesterday was German CPI (inflation) figures which showed that price-growth held at 2.4% annually; which is still above the bank’s target; but crucially is not rising, which lessens the pressure on the ECB to continue hiking rates.

This morning has seen the release of the ECB’s monthly report, with the central bank indicating that that the last two rate-hikes; whilst questioned by some in the market were warranted, given the upside risks to price stability. The report enhances the bank’s stance towards inflation; that they aim to keep price-growth close to 2.0%, which in turn they believe will support economic growth and job creation in the Euro area. The rhetoric is that the bank will keep policy ‘accommodative’ to support its aims, and will ‘monitor very closely all developments with respect to upside risks to price stability’.

The US Dollar made impressive gains across the market yesterday, with dropping growth prospects in the UK and the debt contagion issues in Europe seeing an inflow of funds into the Dollar. The EUR/USD rate fell, from 1.4378 down to 1.4198 by the market close. There was also some positive news from the US with, the monthly budget statement showing a decrease in the negative balance, from -$165 billion to -$129.4 billion.

Today will focus on the release of the US trade balance figures. The nation relies heavily on imported goods, so has a constant deficit, but the currency may weaken slightly if this increases month-on-month.

The Market Team @ KBRFX

Website
Twitter

Foreign Exchange Daily Market Update 08/08/11

View this on our website?

The Pound gained against the Euro, but fell slightly against the US dollar in the foreign exchange market last week. The GBP/EUR rate moved up throughout the course of the week; from Monday’s open of 1.1426, reaching a high of 1.1568 late on Friday, to trade at 1.1518 at the close on Friday ; a good recovery from the week’s lowest point at 1.1364. The GBP/USD however fell throughout the week, from Monday’s open at 1.6441, down to 1.6356 by Friday, hitting a low of 1.6260. The main data events of the week from the UK saw PMI manufacturing and construction fall, from 51.4 to 49.1 and from 53.6 to 53.5 respectively. PMI services figures however, showed a slight improvement, with the level rising from 53.9 to 55.4. The Bank of England did meet during the week, but there was no change in either the base interest rate, or the asset purchase target; with the bank almost at an impasse in terms of policy. A rise in the base rate would be damaging to the housing market, and also economic growth, but any increase in asset purchasing could potentially stoke a rise in inflation.

The week ahead for the UK does contain plenty of high-level market data. Tuesday will see the release of July’s GDP estimate from the NIESR, and the market is not expecting any drastic jumps in growth; with any sort of positive figure set to be considered acceptable. There will also be figures released for industrial and manufacturing production on Tuesday, along with the latest view of the UK’s trade balance, with the market forecast for the negative trade deficit to decrease slightly, which could be positive for the Pound. Wednesday will see the release of nationwide consumer confidence figures, and also the Bank of England’s inflation report, with both events having the potential to move the currency exchange markets. With stock markets falling through the back end of last week, and riots across North London this weekend, consumer confidence may be affected, and could reflect negatively on the currency. A rise in inflation will not be welcome either, with the central bank almost having their hands ties in terms of policy.

The Euro fell across the week, amid news that Italy and Spain will require intervention from the ECB to try and raise extra capital through bond sales. The single currency fell against the US Dollar, the EUR/USD exchange rate dropping from Monday’s open of 1.4388 down to 1.4210 on Friday, with the week’s lowest point at 1.4054. The week’s economic events were not beneficial to the currency, with Euro-zone retail sales falling annually from 6.2% down to 5.9%, and the ECB keeping interest rates on hold. The accompanying press conference to the decision confirmed the stories that had been circulating in regards to the central bank purchasing securities to offset losses suffered in the markets, and this morning has seen that the ECB are focusing efforts on Spanish and Italian securities, with those two nations the most susceptible to default, along the same lines as Greece.

This week will see the European docket release some potentially market moving-data. Tuesday’s German trade balance figures could affect the currency, but with the nation renowned for its strong manufacturing industry, and high export levels it is more than likely we will see a positive result. Wednesday’s focus will turn to CPI (inflation) figures from Germany, with rate-hawks watching closely for any signs of increased price growth, which would give the green light for the ECB to implement another rate rise before the end of the year; which many analysts expect to happen. Thursday will see the release of the ECB’s monthly report for August, which will be closely watched for any shift in rhetoric, and the bank’s predictions for growth and inflation in the coming months. If there is any shift towards a rate hike before the turn of the year, expect to see the Euro appreciate despite the fact the ECB are actively involved in the bond markets to try and stabilise things.

The US Dollar clearly benefited from its safe-haven status last week, despite the last-minute rush to pass through a bill to prevent the nation defaulting. As European stock markets crashed, and the ECB had to intervene into buying securities, the US Dollar benefited, and started gaining across the board. Aside from congress passing the bill to raise the debt ceiling, it was mixed picture in terms of economic data, with ISM manufacturing for July falling, from 55.3 to 50.9, the ADP employment report showing a drop from the previous month’s level of 157,000 jobs added, down to 114,000. Friday finished on appositive note though, with non-farm payroll figures showing a sharp increase for the month, up to 117,000 from 46,000, and the overall US unemployment rate falling from 9.2% to 9.1%.

The week ahead is not data-heavy for the US, but has some very influential data. Following ratings agency Standard & poor’s cutting the US’s credit rating from AAA to AA+ over the weekend; the market will be watching to see how the nation responds. Tuesday will see the Federal Reserve’s interest rate decision meeting, and analyst’s will be hanging on to every word from Fed Chairman Ben Bernanke, for any indication into the current situation and future policy, with many market experts talking up the possibility of more quantitative easing at the start of next year. Wednesday will see the releases of the US’s monthly budget statement, with the week rounding off on Friday with Advance retail sales figures, and the University of Michigan confidence survey.

Mike Hood
KBRFX

Website
Twitter

Foreign Exchange Daily Market Update 18/07/11

View this on our website?

The Pound gained impressively against the Euro and the US Dollar in the foreign exchange market last week. The GBP/EUR rate moved up from 1.1293 on Monday; to trade at 1.1412 by the close of business on Friday, the exchange rate hitting a high of 1.1429 on Tuesday. The GBP/USD exchange rate also showed gains across the week; from Monday’s open at 1.5970, the rate moved up to trade at 1.6145 by Friday’s close. The economic data from the UK during the week wasn’t overly positive though, with CPI (inflation) figures showing a drop in the level of inflation, both monthly and annually, which takes pressure off the Bank of England to look at raising the base-rate anytime soon, as elevated price-growth is easing of its own accord. The UK’s visible trade balance for May also increased its negative deficit, reinforcing the nation’s over-reliance on imported goods; the negative balance increasing from -£7,643,000 to -£8,478,000. The labour market is also showing little sign of improvement, with the unemployment rate remaining unchanged at 7.7%, along with the claimant count rate remaining at 4.7%. There was some negative news though, with jobless claims for June increasing from 22,500 to 24,500 amid expectations for a drop in the number of new claims.

The week ahead for the UK is not data-heavy, but will have some high-level market data. Wednesday will see the release of the Bank of England’s minutes form their last policy meeting. The market will be looking for any rhetoric from policy-makers in regards to future policy, and also the all important voting numbers will be studied, to see if any of the committee sees fit to either increase the asset purchase target, or a need to increase the base interest rate. Amid last weeks falling inflation figures, it seems increasingly unlikely that the central bank have any room to start tightening policy, with a rate-hike having the potential to destroy an already weak housing and labour market. Thursday will see the release of public sector net borrowing figures, with the foreign exchange market likely to show a deep interest in whether the UK government are keeping to their promise of reducing the UK’s debt level and evening up the balance sheet. However, any cuts must be made sensibly as not to effect overall economic growth in the UK.

The Euro weakened considerably against the Pound throughout last week, and also dropped massively against the US Dollar before recovering slightly by the end of the week. The EUR/USD rate opened on Monday at 1.4140, falling to 1.3845 on Tuesday before coming back steadily to trade at 1.4147 by Friday’s close. The currency was not helped by the fact that Greece’s credit rating was cut to ‘CCC’; the lowest level possible, and also European bank stress test results showing that 8 of 90 banks tested by the European Banking Authority conclusively failed the tests for required capital levels and exposure to sovereign debt. Economic data released throughout the week also showed that Euro-zone industrial production fell in June, from an annual rate of 5.3% down to 4.0. CPI (inflation) figures also showed no price growth in the annual or monthly rate, following a rate-hike by the ECB at their last policy meeting. With inflation seemingly under control, it does not bode well for the Euro-zone, as the European market will continue to face fierce pressure over the coming week.

The week ahead will see some high-level market data, starting on Tuesday with the German ZEW economic sentiment survey; with any negative downturn in this reading likely to put pressure on the currency. Wednesday will see the release of German producer price figures, along with Euro-zone consumer confidence, which has the potential to affect the market hugely. Thursday and Friday also have influential data set for release, with German and Euro-zone PMI figures set to cross the wires, along with German IFO readings for business climate, current assessment, and expectations, along with Euro-zone industrial new orders figures.

The US Dollar came under considerable pressure last week; with Congress still yet to agree on an increase to the US’s debt ceiling, which if unresolved could see the US default on debt repayments due for August 4th. This would have drastic consequences on the market, and potentially the US currency, with ratings agency’s confirming that they would cut the US’s credit rating should a default occur. The economic data released from the US last week painted a fairly mixed picture of the overall economy. Figures showed that the US’s negative trade balance increased, from -$43.6billion to -$50.2billion, along with PPI levels dropping, from 7.3% down to 7.0%. CPI (inflation) figures showed no increase in the annual rate of 3.6%. The Dollar was further pressured on Friday, with the highly-influential University of Michigan confidence survey showing a drastic drop, from the previous reading of 71.5, down to 63.8. This figure is considered to be a good early indicator of any economic downturn in the US, with the currency exchange market reacting accordingly upon release, with the Dollar weakening.

The US economic docket this week will mostly focus on the housing market. Tuesday will see housing starts figures released along with building permits figures for June. Wednesday will see existing home sales figures released, with the market forecast for a rapid increase in the level of sales, which would be positive news for the housing market and the overall economy. Thursday will see house price index figures for June released, along with the Philadelphia Fed Index which will give a good insight into the manufacturing sector in the US. A higher reading from the Philadelphia Fed index indicates a positive outlook for the manufacturing sector, contributing to overall economic growth, so could be beneficial for the currency.

Mike Hood
KBRFX

Website
Twitter

Foreign Exchange Daily Market Update 15/07/11

View this on our website?

The Pound continued its surge against the Euro and the US Dollar in the foreign exchange market throughout yesterday. The GBP/EUR rate carried on its upward course, from 1.1349 at the open, to close at 1.1374, while the GBP/USD exchange rate pushed on slightly from the morning’s open at 1.6116 to close at 1.6123. There were no significant data releases from the UK yesterday, with the movements in the currency market, particularly against the Euro being attributed to the ongoing unresolved debt situation in Greece.

There is no economic data scheduled for release from the UK today either, but with plenty of market-moving figures primed for release from the Europe and the US, there could well be sharp movements in the exchange rates today.

One country; and its currency that has remained fairly unaffected by the problems in the world markets over the past year has been Australia, and the Australian Dollar. The currency has strengthened considerably across the board over the past 6 months, with the GBP/AUD rate currently trading at 1.5138; but the nation that has been seen by the market as ‘recession-proof’ is starting to show some signs of weakness. Despite a relatively low unemployment rate of 4.9%, and a currency that has strengthened by 21% against the US Dollar over the past year; languishing consumer spending across the country has led the market to speculate that the Reserve Bank of Australia may postpone their next interest-rate rise, by anything up to three months. With economists wary of the effect a fall-out in Europe could have on the country, where consumer spending accounts for around half the overall economy, the market will be watching any developments very closely.

The Euro has continued to suffer in the foreign exchange market, with negative sentiment towards the Euro-zone rapidly increasing by the day. Greece’s credit rating now stands at ‘CCC’ the lowest possible level; and with news agencies reporting that Italy could be the next country verging on default, despite a rate-hike from the ECB, the currency is weakening considerably. There have been stories in the morning’s UK papers that the Euro-zone could be set for a split, with the stronger member nations Germany and France set to distance themselves from the weaker member states, with the possibility of a two-tier Euro currency being mooted.

Today will see the results of European bank stress tests being published, and with the market predicting a negative outcome overall, the currency could weaken further, with Italian banks in particular being singled out as having dangerously low levels of capital, against what is deemed as some high-risk securities on their balance sheets.

The US Dollar has been weakening since the release of Fed Chairman Ben Bernanke’s semi-annual report to Congress on Wednesday. The EUR/USD rate has continued to fall, from yesterday’s open at 1.4198 down to 1.4162 by the market’s close. The economic data released from the US yesterday was also negative, with retail sales figures for June showing no improvement, holding flat at 0.2% amid expectations for a rise to 0.4%. Producer prices also fell, with the annual rate dropping from 7.3% down to 7.0%.

The US economic docket today does contain two high-level pieces of market data. CPI (inflation) figures for June will be released at 13:30, with the forecast for no change in the annual rate, and also the University of Michigan’s confidence survey will be published this afternoon; with the market poised to react to any positive or negative increase in the reading.

Mike Hood
KBRFX

Website
Twitter

Foreign Exchange Daily Market Update 14/07/11

View this on our website?

The Pound continued to gain against the Euro, and also the US Dollar in the foreign exchange market yesterday. The GBP/EUR rate moved up from the morning’s open of 1.1356 to trade at 1.1373 by the market close. The GBP/USD exchange rate shot up sharply from the early open at 1.5953 to trade close to 1.6112 by the end of the day. The economic data released from the UK didn’t provide a hugely encouraging picture, with jobless claims increasing for the month of June, up from 22,500 to 24,500 against forecasts for the number to fall dramatically to around 15,000. This is a blow for the UK’s already weak labour market. Despite this increase, the ILO unemployment rate held steady at 7.7%, along with the claimant count rate staying at 4.7%.

There is no scheduled economic data from the UK today, so the currency exchange market will take direction from risk-events in the world’s other major economies and any changes in sentiment towards the economic outlook for the UK, should there be any high-profile government statements or press releases.

The Euro continued to slide against the Pound, but did regain some ground against the US Dollar yesterday. The EUR/USD exchange rate pushed up from 1.4047 at the open, to trade at 1.4162 by the market’s close. The main piece of economic data from Europe yesterday was not positive however, with Euro-zone industrial production falling dramatically, the annual rate dropping from 5.3% to 4.0%, not good news for the overall European economic picture, where some of the biggest economies rely heavily on industry and manufacturing.

Today will see the market focus on price growth in the Euro-zone, with CPI figures set for release at 10:00. The market is forecasting no change in either the annual rate of 2.7%, or the month-on-month growth rate of 0.0%, but the currency could take sharp moves if there is a surprise either to the up, or the downside. The European market will also look towards today’s Italian bond sale. With Italy one of the periphery European nations that is suffering from high-debt burdens, the government is looking to raise capital with a sale of 10-year treasury bonds. A negative reception to this though, could be bad for the currency, with low investor confidence one of the factors that could see the Euro continue to weaken.

The US Dollar lost ground against both the Pound and the Euro yesterday. The currency was not helped by Federal Reserve Chairman Ben Bernanke’s semi-annual report to congress yesterday, in which he offered a fairly mixed assessment of the overall state of the US economy. While Fed officials expect the pace of the economic recovery to pick up in the coming quarters, Bernanke warned of "headwinds" that are affecting the recovery, including the slow growth in consumer spending, the depressed housing sector; still-limited access to credit for some households and small businesses, and fiscal tightening at all levels of government.

Today’s economic calendar from the US will see the release of advance retail sales figures, along with PPI figures. With retail sales set to increase slightly, and producer prices forecast to show slight improvments, the US Dollar could regain some of the losses it showed yesterday.

Mike Hood
KBRFX

Website
Twitter

Foreign Exchange Daily Market Update 12/07/11

View this on our website?

The Pound finished the day following the same pattern as much of last week; higher against the Euro and slightly lower against the US dollar in the foreign exchange market. The GBP/EUR exchange rate pushed up from the morning’s open at 1.1293 to trade at 1.1350 by the close, with the GBP/USD rate dropping from the morning’s level of 1.5970, down to 1.5925. This was again good news for people who are buying Euros, but not so good for those buying Dollars. There was no economic data of note released to influence movements, with the market taking direction from the ongoing unsolved debt issues in Europe.

Today will be a different story in terms of economic data though from the UK, with a lot of high-level releases. The early hours of the morning will see Nationwide consumer confidence figures released, which could have a bearing on the direction of the Pound, should we see any surprises to the negative, or the upside. The market will also focus on the release of CPI (inflation) figures, both annualised and monthly, with forecasts calling for no change. Also, retail price index figures are due to report, with analysts calling for a slight increase in the index, from 235.2 up to 235.8. Another piece of important data will be the UK’s visible trade balance, which is set to see a slight improvement in the negative surplus, indicating a boost for the UK’s export market.

The Euro continued to weaken against the Pound and the US Dollar, with the GBP/EUR rate falling from 1.4140 to 1.4029 from the market open to the close. The ongoing unsolved debt issues in Greece are not helping the currency, which despite the ECB hiking rates for the second time this year last week, is suffering because of uncertainty, and the increased possibility of default. Today saw some low-level market data from France, with Industrial and Manufacturing production figures showing impressive monthly growth, from -0.5% up to 2.0%, and 0.1 up to 1.5% respectively. The currency exchange market however, took little notice of this, and continued to show the negative attitude towards Europe’s current situation.

The European economic docket on Tuesday will see some important data from Germany. CPI (inflation) figures are set to show a slight drop in the harmonised level of growth, with the market predicting a slowdown in the annual rate from 2.4% to 2.3%, and no growth month-on-month, with the level set to hold at 0.0%. This would not be good news for the Euro, as it would show that the largest economy in the Euro-zone is showing a drop in prices, going against the ECB’s rhetoric that rate-hikes are necessary to combat inflation.

The US Dollar continued to strengthen in the foreign exchange market yesterday, benefiting from its safe-haven status by gaining against the Euro and The Pound. There were no significant data events released from the US to back up any positive movement, but the feeling among traders is that inflows to the currency during times of uncertainty particularly within the European market are benefiting the Dollar.

Today’s data may exert more influence on the currency market; with US trade balance figures set to show an increase in the negative surplus incurred by the US, from -43.7 billion dollars, to -44.0 billion dollars. This is not good news for the US economy as it shows an increasing over-reliance on imported goods, and that more funds for purchases are leaving the US than coming in. The Federal Reserve will also be releasing the minutes form their last policy meeting. The market will watch closely for any indications on future policy, and the Fed’s assessment of the current economic situation.

Mike Hood
KBRFX

Website
Twitter

Foreign Exchange Daily Market Update 05/07/11

There wasn’t a huge amount of movement in the foreign exchange market yesterday, owing to the US holiday for the 4th of July celebrations. The Pound finished the day slightly lower against the Euro and the US Dollar; the GBP/EUR rate falling from the morning’s open at 1.1098 to 1.1076 by the close, and the GBP/USD rate dropping slightly from 1.6126 at the open, to 1.6092 at the end of the UK business day. The current exchange rates are almost at 2 week lows for both currency pairs, not the optimum time for buying Euros or buying Dollars. The economic docket from the UK yesterday showed a contraction in PMI construction for June, from 54.0 down to 53.8.

Today’s economic data from the UK is minimal, with PMI services figures for June reporting. The market has forecast a slight drop in the index figure, from the previous month’s level of 53.8, down to 53.5. While this outcome would not be beneficial for the UK economic outlook, it is unlikely to force major moves on the currency exchange market by itself. Update: The figure released at 09:30 actually saw an increase in the figure, to 53.9, reversing 3 months of decline, and the Pound saw a sharp appreciation following the release.

The Euro regained slightly against the Pound, and moved a touch lower against the US Dollar yesterday. The EUR/USD rate fell from 1.4534 down to 1.4527, a minimal movement considering the market patterns of the last few weeks; but not surprising considering the market had considerably less trading volume throughout the day due to the US holiday. The only data of note from Europe yesterday was Euro-zone PPI figures, which showed a downturn in the annual level, from 6.7% down to 6.2%.

Today will see Europe release the overall Euro-zone retail sales figures, which are expected to show a drop, from 0.8% down to 0.6%, not a positive sign for the retail sector, and also a negative nod towards consumer sentiment, as it shows the European public are not spending their money on the high-street. German PMI services figures have already been released this morning, and showed a drop, from 58.3 falling down to 56.7. Later this morning we will see the release of combined Euro-zone PMI composite figures, which the market has forecast to hold steady, at the previous reading of 53.6%.

The US Dollar made hardly any moves on the foreign exchange market owing to the 4th of July holiday, and consequently there was no economic data released yesterday.

Today will see the release of US factory orders, which the market is expecting to see a sharp upturn, from the previous month’s level of -1.2% to record a positive level of 1.0%,, which could be beneficial 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 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 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.