Foreign Exchange Daily Market Update 09/09/11

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The Pound made a sharp reversal in the foreign exchange market yesterday; finishing the day trading higher against the US Dollar; and having made impressive gains against the Euro. The GBP/EUR exchange rate rocketed up from the morning’s open at 1.1322 to trade at 1.1487 by the end of the day. There was also a small rise in the GBP/USD exchange rate, from 1.5921 at the mornings open to 1.6009 at the day’s close. The main economic event from the UK yesterday saw the Bank of England keep the base interest rate on hold as expected; and also made no change to the asset purchase target. The market will have to wait for the release of the meeting’s minutes to see the full extent of the reasoning behind the decision; and the all-important voting majorities from the Monetary Policy Committee.

This morning has seen the release of producer price figures from the UK; with the result being an increase in the core output level, from 3.4% to 3.6%, some positive news for the UK.

The Euro suffered in the currency exchange market yesterday; falling heavily against both the Pound and the US Dollar; after less than impressive German trade balance figures; and more worryingly, a quite dovish tone from ECB President Jean-Claude Trichet at the ECB’s latest policy meeting; with the President highlighting the downside risks to economic growth, with the market now expecting the central bank to make rate-cuts by the end of the year.

The Euro-zone’s sole important figure for today has already been released this morning, with August’s CPI (inflation) figures form Germany showing an increase in both the annual and monthly level of price-growth; from 2.3% to 2.4% and from -0.1% to 0.0% respectively. This could pose a problem for the Euro-zone as a whole; with the expectation of rate-cuts in Europe increasing, rising inflation will be a difficult situation for the central bank to control.

The US Dollar for the fourth day running gained against the Euro; the EUR/USD rate pulling back further from 1.4061 to 1.5935; the Dollar taking advantage of the worsening outlook in Europe, but the currency lost some of its previous gains against the Pound, with the GBP/USD exchange rate picking back up to above 1.60. The economic data released from the US yesterday saw the US trade balance reduce it’s negative trade deficit slightly; which is positive news for the overall economy; but it may only be a temporary drop, with the previous day’s beige book economic report suggesting that the auto-industry; which is a huge contributor to the US’s economy, has been affected by smaller supply of stock from Japan, which could have been a factor in overall falling import levels.

There are no scheduled economic events from the US today; so the currency will be open to shifts in sentiment and news from the world’s other major economies.

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

Foreign Exchange Daily Market Update 08/09/11

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The Pound continued with another day of losses against the Euro and the US Dollar in the foreign exchange market yesterday. The GBP/EUR exchange rate fell from the mornings open at 1.1372 to 1.1343 by the end of the day, the Pound not helped by overall disappointing economic figures which showed that industrial production and manufacturing in the UK continued to fall annually; at an advanced pace. There was small glimmer of positive news with July’s figures for manufacturing production showing an increase in the monthly level, from -0.4% to +0.1%, but the annual level slid once again from 2.1% to 1.9%, enhancing the dire state of the UK’s industrial sector.

The main focus on the UK market will be today’s Bank of England meeting; even with the central bank expected not to make any change to either the key interest rate or the asset purchase target, last month’s meeting showed a shift in the voting towards providing further monetary stimulus, and the market will be looking for the next minutes release to see if there has been any advance on this.

The Euro again made some small gains against the Pound but fell against the US Dollar, the EUR/USD exchange rate coming down from 1.4083 at the mornings open to 1.4048 by the days close. There was some positive news though; with German industrial production figures showing a marked increase in both the monthly and annual levels; from 6.6% to 10.1 and from -1.0% to 4.0% respectively. After disappointing factory order figures the day before, it was a welcome boost for the Euro-zone, with some questions marks hanging over the current state of the strongest member state’s most important sector.

This morning has already seen the release of July’s German trade balance; which was a worse result than expected; the nations trade surplus contracting from 12.7 billion Euros to 10.4 billion; hardly surprising considering the release of last months export figures for the nation, which saw a sharp drop. There is a possibility that a strong currency is hindering Germany’s exporting capability; and it will be interesting to see if the ECB President; Jean-Claude Trichet faces any questions on the subject at today’s ECB rate meeting. Today’s ECB meeting is not expected to see any changes made to the base interest rate; or the central bank’s approach to bond-purchasing; but as always, one of the key factors will be the post-decision press conference; where the ECB President will give more insight into the central bank’s current thinking, and expectations for the coming months.

For the third day running, the US Dollar gained across the board in the currency exchange market, pushing back against the Euro and the Pound, the GBP/USD exchange rate falling from 1.6016 at the mornings open, down to 1.5941 by the end of the day. The release of the Federal Reserve’s Beige Book economic survey yesterday painted a fairly so-so picture of the overall economy. Local businesses reported little growth and some decline in sales, with manufacturers also giving a negative outlook. The service sector did see some improvements, but the housing market remained subdued; with the banking sector reporting little demand for loans, especially from consumers and commercial real estate companies. This could add more fuel to the argument that the Federal Reserve will need to undertake further monetary stimulus in the coming months (QE3), which would potentially see enhanced economic growth.

Today will see the release of July’s US trade balance figure; with the headline level expected to show a decrease in the nation’s trade deficit; from -53.1 billion dollars, to around -51.0 billion dollars. This would suggest either an increase in exports, or a drop in imports from the nation. With the Fed’s beige book survey yesterday revealing that auto retailers are struggling due to slower stock supply from Japan; this could be a contributing factor.

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

Foreign Exchange Daily Market Update 04/08/11

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The Pound picked up against both the Euro and the US Dollar in the foreign exchange market yesterday. The GBP/EUR rate moved up from the morning’s open at 1.1447 to trade at 1.1460 by the day’s close, with the GBP/USD exchange rate rising from 1.6305 to 1.6409 throughout the day. The sole piece of economic date from the UK was PMI services figures for July, with the index showing improved growth from the previous month’s level of 53.9, up to 54.4.

Today’s main event will be the Bank of England’s interest rate meeting, with the market fully expecting no change in either the base rate, or the asset purchase target; but despite inflation remaining well above the bank’s target level of 2.0%, weak economic growth is preventing policy-makers from raising rates from their current historic low of 0.5%. There is unlikely to be any comment from the bank alongside today’s decision, with the market having to wait for the release of the minutes for the possibility of any change in the voting numbers.

The Euro slipped slightly yesterday, but did make some gains against the US Dollar, the EUR/USD rate moving up throughout the day from 1.4240, to trade at 1.4317 by the day’s close. The European economic docket yesterday was fairly positive, with Euro-zone PMI services, and the composite figure showing gains for the month of July, up from 51.4 to 51.6, and 50.8 to 51.1 respectively. Retails sales for the Euro-zone also saw impressive monthly growth, the index showing a jump form -1.3% to a positive 0.9% for the month of June. This did seem to give the currency a slight boost, despite continued claims by various news agencies that Spain will be the next European nation to seek additional funding due to its burgeoning debt-load.

The European Central Bank will be meeting today, like their English counterparts; to decide on any changes to the current base interest rate. After hiking rates twice this year to combat inflation throughout the Euro-zone, it is unlikely that the ECB will do so gain this month; but the market is expecting to see further tightening before the end of the year. Traders will be paying close attention to the post-decision press conference for any visible signs of future policy movements, and ECB President Trichet may well face some tough questions in regards to the health of periphery nations such as Spain, Italy and Portugal.

The US Dollar lost ground all across the currency exchange market yesterday, despite the fact that Congress managed to pass legislation preventing the nation defaulting on its debt repayments. The currency is still facing pressure, as the market picks apart the finer details of the bill, which contains hundreds of billions of dollars worth of cuts, which could well contribute to a slowdown in overall economic growth in the US. Yesterday saw a negative outlook in terms of economic data, with factory orders for June falling drastically, from 0.6% down to a negative reading of -0.8%. ADP employment figures for July also fell from the previous month’s level of 157,000 jobs added, with this months’ figure coming in at 114,000 jobs added. The other figure of not was the ISM non-manufacturing index, which was also a disappointment, with the level falling from 53.3 down to 52.7.

There is no economic data of note scheduled for release from the US today, with only low-level market data on the docket. The currency will therefore be open to movement based on news events and data from the world’s other major economies.

One currency worth taking note of currently is the Australian dollar, which has started to weaken against the Pound, the GBP/AUD exchange rate moving above 1.5300 from last weeks levels closer to 1.4900. Negative retail data, along with poor market confidence has seen the Aussie Dollar slide over the past few days, with investors seeing an increased chance that the Reserve Bank of Australia may start cutting interest rates before the end of the year, despite inflation remaining well above the bank’s 3.0% target. Saul Eslake, a director at the Grattan Institute, said gloomy retail sales figures - the worst since the 1990s recession - prompted investors to believe the Reserve Bank's next move was a cut.

Mike Hood
KBRFX

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Daily Foreign Exchange Market Update 02/08/11

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The Pound saw some choppy trading against the Euro yesterday and suffered heavy loses against the US Dollar. The GBP/EUR rate opened the trading day at 1.1410 where it then fell to a low of 1.1354, before finally rising to its peak of 1.1460 when the European market closed. The GBP/USD rate did not manage to make a similar recovery, instead following its open at 1.6432 the exchange rate began to drop and eventually closed the day out at a low of 1.6237. Part of the Pound's decline can be attributed to a disappointing reading for July's manufacturing Purchasing Manager's Index (PMI) which fell to 49.1 down from 51.4 to indicate a contraction in the UK's manufacturing sector.

Today the foreign exchange market will see the release of July's PMI for the construction sector with forecast's calling for the index to slip from 53.4 to 53.1. This outcome could push the Pound lower against both the Dollar and the Euro as construction growth slows. However, given yesterday's poor manufacturing PMI, its possible that an even greater drop in activity could be reported, resulting in a steeper decline in the exchange rate.

Yesterday, currency exchange traders saw the EUR/USD rate drop after the currency pair peaked at 1.4453 by mid-morning, at that point the rate fell sharply over the early afternoon to hit a low of 1.4190. On the docket July's manufacturing PMI's for France, Germany and the Euro-zone were released. The French PMI came in above expectations at 50.5, while the Euro-zone reading came in-line with market forecasts at 50.4, however Germany's PMI was announced marginally short of forecasts at 52.0 instead of 52.1.

Looking ahead, the Euro-zone Producer Price Index is expected to show that factory price growth had slowed in June to 5.9% compared to the same time last year. The outcome will mean inflationary pressures will have eased and the ECB will not have to consider carrying out another interest rate hike at the next policy meeting. This can be considered good for the Euro as it allows weaker Euro-zone peripheries a chance to grow.

The US Dollar finally recovered some lost ground against both the Euro and the British Pound. The Dollar regained its strength when confidence was restored in the US economy following Congress's agreement to raise the debt ceiling, however the Senate still needs to vote on the proposal before it's put into effect. On the data front the ISM Manufacturing index fell below expectations in July with a reading of 50.9 down from 55.3 to show that manufacturing growth has slowed. The Prices Paid sub-index also fell over the same period form 68.0 to 59.0, while Construction Spending in June picked up by 0.2% to surprise forecasters.

Headlining the US docket today will be the Senate's vote on the Debt Limit Bill that was passed by Congress yesterday. The bill seeks to raise the US debt ceiling by $900 billion while cutting the federal budget by $917 billion over the next 10 years. Should the Bill be passed by the Senate, then the US could receive a boost in confidence by the global market which in turn could see the Dollar appreciate. However before the vote, the docket is scheduled to see personal income growth slow in June from 0.3% to 0.2%, while core personal consumption for the same period will match this decline. The forecasted outcome could weigh on the Dollar ahead of the Senate's vote.

Sam Kennison

KBRFX

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Foreign Exchange Daily Market Update 01/08/11

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The Pound finished last week higher against both the Euro and the US Dollar in the foreign exchange market. The GBP/EUR rate picked up throughout the week, from Monday’s open at 1.1346 to close on Friday trading up at 1.1425. The GBP/USD exchange rate followed a similar pattern as well, with the rate on Monday of 1.6292 rising across the week to levels of 1.6454 on Friday. The week’s economic data was fairly positive for the UK, the main highlights being Monday’s BBA loans for house purchase figures rising beyond forecasts, and Tuesday’s 2nd quarter GDP reading coming in line with estimates amid fears of a bigger drop in growth; which would have been hugely detrimental for the currency. The week rounded off on Friday with some more positive figures, with mortgage approvals rising by 2,000 for the month of July, and Net consumer credit figures also showing an increase.

The week ahead will be mainly interest rate focused; Thursday’s Bank of England meeting is expected to see no change in either the base rate or asset purchase target; but it is the rhetoric that will be watched closely, with many analysts feeling the BoE has no other option but to sit tight. Any sense of helplessness on the part of the BoE could be detrimental to the currency; but it may well be that the market will wait for the release of the minutes before the currency exchange market is deeply affected. We will see PMI figures for manufacturing, construction and services this week; with the three readings to be released on Monday, Tuesday, and Wednesday respectively; with Friday rounding off with PPI output figures for July.

The Euro did weaken against the Pound but made a small gain against the US Dollar last week; the EUR/USD rate moving slightly from Monday’s open at 1.4359 to trade at 1.4398 by Friday’s close; the Euro rallying back from a mid-week low of 1.4228. The pressure on the currency did ease slightly with a restructuring agreed for Greece’s debt; but news has begun to filter through that Spain could be the next country in line to seek additional funding or restructuring to prevent risk of default. The market data released from Europe during the past week was fairly mixed; German CPI rising annually from 2.4% to 2.6%, but the unemployment change showing a negative change, from -8,000 jobs to -11,000 jobs. German retail sales also fell, from 3.1% to -1.0%, but the figure was above expectations so the currency did not suffer as much.

The European economic docket this week will see Euro-zone PPI figures released on Tuesday; Euro-zone retail sales on Wednesday, and German factory orders on Thursday; but the biggest event will be Thursday’s ECB interest rate decision. Whilst no change is expected in the base rate; as always the focus will turn to the following press conference and the currency will react to any change or reinforcement of rhetoric from the ECB’s president - Trichet. The week will finish off with German industrial production figures on Friday.

The US Dollar continued to suffer throughout last week, as the ongoing scenario of the nation defaulting weighed on the currency and bond markets. Economic data was fairly mixed, with consumer confidence rising on Tuesday; but durable good orders falling heavily on Wednesday. Friday was a negative day overall; with the Chicago purchasing managers index falling from 61.1 to 58.8, and the University of Michigan index also coming lower, from 63.8 to 63.7. 2nd quarter GDP figures showed a rise in the annual growth rate, from 0.4% to 1.3%, but way below forecasts of a figure of 1.8%. Quarterly though; the growth rate exceeded market expectations of a 2.0% reading, and reported at a level of 2.3%.

This week will see plenty of high-level market data from the US, amid the news that Congress are set to vote on a plan that will increase the US’s debt ceiling and prevent it defaulting. A plan has been put together; with President Obama confident of house approval, and this will go some way to settle the market, with the SU Dollar showing a slight appreciation already this morning. Today will se the release of ISM manufacturing figures, and construction spending figures; which will give some insight into the health of two very important sectors in the overall economy. Tuesday will focus on personal income and spending figures, with the results key to any future growth in the economy, and could reflect on retail sales results also. Wednesday sees the labour market come under close scrutiny, with the ADP employment change figures set to report a slight drop, which would weaken the currency ahead of Friday’s often-surprising Non-farm payroll report. The Non-farm figures traditionally stray from market estimates, and the US Dollar could see sharp movements off the back of any surprises.

Mike Hood
KBRFX

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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 09/06/11

The news that Moody’s Investor Services could potentially downgrade the UK’s AAA credit rating pushed the Pound lower during yesterday’s trading session. The ratings agency warned that the UK could lose its top credit rating if the government failled to hit its fiscal targets. Francesco Meucci of Moody’s said, “slower growth combined with weaker-than-expected fiscal consolidation efforts” could be cause “to reconsider our stance.” However Meucci did state that the outlook for the UK’s AAA credit rating remains stable, but the warning was enough to stir the foreign exchange market and the GBP/USD exchange rate fell to 1.6355, but this morning the rate had recovered to 1.6466 making it better to buy Dollars.

For the first time this week the UK will be publishing important economic figures, the main event being the Bank of England's interest decision for the month. Forecasts call for the central bank to hold key interest rates at the historic low of 0.5% and to maintain the stock of asset purchases at £200 billion. A surprise rate hike would bolster the Pound's standing, but given the ongoing weakness in the economy and Chancellor George Osborne's implementation of austerity measures, the chances of this happening are very remote. Prior to the interest rate, the UK's visible trade balance is expected to show a narrower deficit since March from £7.66 billion to £7.549 billion. The news could potentially lift the Pound before the BoE announce their rate decision.

A larger than expected decline in Germany’s export figures for April worked against the Euro yesterday, and the single currency was further hampered by an unexpected contraction in German industrial production over the same period. The figures showed that exports in Germany fell by 5.5%, a much worse result than estimates of a 3.0% decline, while the nation's industrial production contracted by 0.6% month-on-month when a 0.2% increase had been forecast. Europe's second round of GDP estimates did nothing to support the Euro despite confirming that Euro-zone growth was up by 0.8% from 0.3% in the 4th quarter of 2010 as sovereign debt fears continued to weigh on the Euro when news came out that Greece may not receive its next lot of aid. A report published by Reuters said that the EU, IMF and ECB would not provide further aid unless Greece could resolve under-financing in its adjustment programme. The news allowed the Pound to regain its footing against the Euro and the exchange rate rose to 1.1250 by the open of the Asian session and the GBP/EUR exchange rate had slipped back to 1.1238 by this morning.

As always when the Bank of England announce their interest rate decision, so too will the European Central Bank. Economists widely believe that the ECB will hold interest rates at the current level of 1.25%, however there will be huge interest in the conference that follows. Trader's will listen closely to ECB President Jean-Claude Trichet's comments for the key phrase of "strong vigilance" to be dropped, a phrase that signals that a rate hike will take place at the next policy meeting and this would bolster the Euro.

The Fed's Beige Book report headlined the US trading session yesterday, and showed that growth had slowed in the federal districts of New York, Philadelphia, Atlanta and Chicago, while other districts continued to grow at a steady pace, mainly led by manufacturing. Ongoing weakness was reported within the housing sector as demand fell for residential construction and real estate, and consumer spending was also reported lower as consumers struggle with rising food and energy prices and fewer job opportunities. The overall picture is one of sluggish growth in the US, meaning that the Federal Open Market Committee is unlikely to raise rates off the 0.25% low until a more robust recovery is achieved.

Today’s docket will be another quiet one for the US with April’s trade balance sheet standing out as the most influential of the figures out today. Forecasts call the US trade deficit to widen from $48.2 billion in March to $48.8 billion, an outcome that could potentially weaken the Dollar’s standing against the other majors. However the currency could receive a slight lift later into the session as weekly jobless claims figures look set to fall for both initial and on going claimants.