The Pound made gains against the Euro while declining against the Dollar as investors increase their focus on growth as a foundation of fundamental strength.

Fundamental sterling traders would have only a low-level piece of event risk to absorb Tuesday. Far more important a concern for the currency going forward will be the overall health of the economy. Economic performance will further determine interest rates and fiscal policy going forward.

The Dollar made considerable gains against the Pound and the Euro yesterday as risk aversion increased due to an  article in the Wall Street Journal questioning whether the European stress test of the banking sector has given a true and fair view of the European banks.

Tonight’s main event is the Fed Beige Book ahead of the FOMC in two weeks. It is unlikely to report any progress being made in terms of building momentum in the economic recovery, and should confirm the risk averse attitude of markets.

The Euro declined against the Pound and the Dollar as the Euro is at the mercy of the financial media as the market leverages its fiscal troubles. Significant fundamental concerns or comforts can easily be overlooked depending on the prevailing interests of the speculative ranks. If investors are optimistic, an economically troubled region could be construed as a late bloomer with depressed prices; or a prominence of pessimism could lead to a selloff of a relative leader.

Also to note the Wall Street Journal’s report that government debt exposure in the EU stress tests was understated; and Bloomberg’s stories that Greece had yet to fully disclose the full details of its debt obligations while the Euro region banks will need to raise 240 billion Euros through year’s end are well documented. Nonetheless, for an antsy market, these kinds of reports only fuel fear and a increase in risk aversion.

Data released 08.09.10

UK      09.30 Industrial Production (July)

Manufacturing Production

UK      15.00 NIESR GDP Estimate (3 Mths to August)

US      19.00 Federal Reserve Bank Publishes Beige Book

US      20.00 Consumer Credit (July)

The Pound declined against the Euro while remaining relatively unchanged against the Dollar yesterday. Early this morning the Pound has been supported by a positive BRC retail sales figure which is expected to be down to an increase in tourism. It is likely that the Pound may recoup some recent losses against the Euro this morning but remain under pressure against the Dollar as there no significant economic data to change current trends.

The Dollar declined slightly against the Euro while remaining relatively unchanged against the Pound as yesterday was a fairly quiet day in the financial market without any interesting economic indicators and the Americans celebrated Labour Day.  The Dollar remained near post Nonfarm lows as Asian and European stocks rallied.

The Euro made gains against the Pound and the Dollar yesterday but has come off overnight as resurfacing worries about the euro zone’s banking pushed investors to sell the single currency. Fears were triggered by a report in the Wall Street Journal questioning the viability of European Banks and with this likely to be the focus for today in the absence of any major data releases this leaves the euro vulnerable.

Data released 07.09.10

No Significant data

The Pound declined against the Euro while making gains against the Dollar on Friday as investors risk appetite dominated the market.

The Bank of England Chief Economist Bean spoke at Jackson Hole this weekend and stated that “The deleveraging process is incomplete, the recovery remains fragile, and a considerable margin of spare capacity is yet to be worked off, while further policy action may yet be necessary to keep the recovery on track.”  Bean also reported the central bank may impose policies to limit the ability of borrowers to take on riskier mortgage loans.  Bank of England’s Monetary Policy Committee will convene next week and is expected to keep monetary policy unchanged.

The Dollar declined against the Pound and the Euro on Friday following a better than expected US non-farm payrolls report for August where the payroll fell by 54,000, a much smaller drop than the predicted 100,000, which helped risk appetite as fears of a double dip recession ease a little

The Euro made gains against the Pound and the Dollar following an increase in risk appetite. In euro zone news, EMU-16 August PMI services improved to 55.9 from the prior reading of 55.6 while the PMI composite ticked higher to 56.2.  Other data saw EMU-16 July retail sales up 0.1% m/m and 1.1% y/y.  Also to note European Central Bank member Gonzalez-Paramo said rates are “appropriate” and cited upside inflation risks.  ECB’s Draghi said policy will remain “accommodative.” ECB member Wellink said there is “no capacity” for another round of bailouts.

Data released 06.09.10

EU: 09.30 Sentix Investor Sentiment (September)

The Pound declined against the Euro while making gains against the Dollar after a weaker than expected UK purchasing managers’ survey. The Markit/Chartered Institute of Purchasing and Supply Manufacturing PMI fell to 54.3 in August, the lowest level since November last year.

The Dollar declined against the Pound and the Euro after upbeat data from China and Australia boosted risk appetite. China’s manufacturing sector had a moderate rebound in August after slowing for several months which helped soothe worries over the health of the global economy. However, market sentiment was slightly dented after the US private sector unexpectedly cut jobs in August delivering yet another blow to the already faltering economic recovery. A report from ADP Employer Services showed the private sector cut 10,000 jobs in August compared to a revised gain of 37,000 in July. On the up side, the Institute for Supply Management reported its index of national factory activity rose to 56.3 in August up from 55.5 in July.

The Euro made gains against the Pound and the Dollar following a boost in risk appetite and upbeat data from China and Australia which brought risk appetite to the forefront of many investor mind. On the economic data front, the Markit Eurozone Manufacturing Purchasing Managers’ Index rose to 55.1 in August. This was the slowest pace of expansion in the euro zone since February.

Data released 02.09.10

EU      10.00 GDP (Q2 Details)

EU      10.00 PPI (July)

EU      12.45 ECB Interest Rate Announcement

EU      13.30 ECB Press Conference

US      13.30 Initial Jobless Claims (w/e 28th August)

US      13.30 Productivity / Labour Costs (Q2 Revised)

US      15.00 Factory Orders (July)

US      15.00 Pending Home Sales (July)

The Pound declined against the Euro while trading near a five-week low against the U.S. dollar on gloomy global growth outlook. This comes despite upbeat news that July U.K. mortgage approvals in July and consumer confidence in August exceeded expectations.  The GBP has been on the decline as investors were looking for something more robust. The UK economy is still weak even though GDP for the second quarter rose 1.2 percent last week.

The Dollar declined against the Euro while making gains against the Pound as risk once again shifted in favour of lower yielding currencies despite a better than expected consumer confidence read of 53.5 vs. 50.7 eyed. Recent comments from Fed Chairman Ben Bernanke suggested that the economic growth has been “too slow” and unemployment is currently “too high”.

The Euro made gains against the Dollar the Pound after a comeback in risk aversion, sending Asian equities lower. German unemployment reported positive data, posting a decline of -17k from a revised -21k drop in July. The data showed that Germany’s labour market is recovery steadily, suggesting that the area is holding up rather well considering the slowdown in a global recovery.

Data released 01.09.10

UK      09.30 Mortgage Applications (July)

EU      10.00 Flash HICP (August)

EU      10.00  Unemployment (July)

US      14.00 Case Shiller House Prices (June)

US      14.45 Chicago PMI (August)

US      15.00 Consumer Confidence (August)

US      19.00 FOMC Publishes Minutes of 10th August Meeting