The Pound extended its gains against the Euro in the foreign exchange market yesterday, while remaining relatively unchanged versus the US Dollar. The GBP/EUR rate picked up from the day's open of 1.1370 and peaked at 1.1442 before closing out at 1.1420. The GBP/USD rate opened at 1.6330 and closed the day unchanged, but not before the currency pair hit a morning high of 1.6363 and then shifting to a low of 1.6290. On the docket the Confederation of British Industries' Reported sales index fell in July unexpectedly to -5 when forecasts had called for the index to increase from June's score of -2 to 2. The data's release coincides with the Pound's drop against the Dollar; however no noticeable difference was witness against the Euro.
This morning, the economic docket is scheduled to see June's Mortgage Approvals released, with expectations calling to for a rise from May's total of 45,900 to 46,000. The outcome would prove positive for the Pound.
The Euro weakened against both the Pound and the US Dollar over the course of yesterday's trading session. The EUR/USD rate slipped from the morning's level of 1.4350, with the pair closing the day at 1.4310. On the docket Germany's unemployment change figure for July headlined the European data set, with the number of unemployed falling by 11,000 which missed estimates for a contraction of 15,000 unemployed. To further compound the outlook of the Euro-zone and the Euro itself, July's sentiment indicators on the economy, the region's industrial and services sectors and consumer confidence all came in below expectations, except for the consumer confidence index which improved marginally but remained entrenched in the negative with -11.2.
On the European economic calendar the currency exchange market has already seen retail sales in Germany fall by 1.0% in June compared to a year ago, however this was a softer contraction than the forecasted 1.6% drop in sales. Looking ahead the annualised Euro-zone Consumer Price Index is expected to hold steady at 2.7% from May into July. The outcome may have little impact on the Euro as the data isn't entirely supportive of a rate hike by the European Central Bank which would've made the currency more attractive to foreign investors. Regardless the Euro is likely to remain under selling pressure today as debt woes continue to weigh on the region.
The US Dollar managed to gain some ground against the Euro as the economic calendar provided an improved outlook for the nation, however no such meaningful move was seen against the Pound. The economic docket revealed that the number of first time claimants for jobless benefits was lower than expected in the week ending 22nd July, with claims falling from 422,000 to 398,000. A rise in pending home sales during the month of June of 17.3% compared to the same time last year also helped to improve the US economic outlook.
Looking ahead, today’s economic calendar is scheduled to see 2nd Quarter GPD figures for the US released with economists forecasting that the annualised growth rate will slow from 1.9% to 1.8%, while the quarter-on-quarter rate is expected to hold steady at 2.0%. This may prove to be positive for the US Dollar given that the US economy is still evidentially growing, and the University of Michigan’s consumer confidence reading for July may also benefit the Dollar if the index increases in line with its 64 forecast reading. However with the US Congress having not yet agreed to raise the debt ceiling, volatility on the US Dollar may ensue when the US market opens, over shadowing any positive indications from today’s economic data.
Sam Kennison
KBRFX
