The Pound made gains against the Euro and the Pound on Friday as risk remains very much the driving force for the currency markets.  Economic data is very light until Tuesday’s consumer price index release; therefore the currency will be traded largely on market sentiment. On the technical’s, the GBP/USD will likely be pressured to reach the 200-day moving average level of 1.5511 later today or early next week.

The Dollar declined against the Pound while making gains against the Euro on Friday. Consumer price index posted favourable data for July, rising 0.3% from the previous -0.1% and 0.2% eyed, easing inflation fears. The University of Michigan also released their consumer confidence report which showed an improvement from 67.8 to 69.6 for August. Retail sales, on the other hand, posted only a mere 0.4% gain vs. the 0.5% eyed. Although retail sales fell short of expectations, positive CPI data coupled with strong consumer confidence provided much relief for the markets.

The Euro declined against the Pound and the Dollar as the Euro continued to slide despite positive GDP numbers for the second quarter. The German economy expanded 2.2% while France expanded by 0.6%.  Eurozone trade balance for June also posted positive numbers, with exports and imports increasing 2.4B vs. the previous -3.4B and 1.0B eyed. However, data was not enough to fend downward pressure, collapsing the euro to fall under 1.2800. The weak euro suggests that the market was more focused on the weaker than expected Italian bond auction and Ireland banking woes.

Data released 13.08.10

EU      10.00 Final HICP (July)

US      13.30 Empire State – NY Fed Manf. Index (August)

US      14.00 TICs Net Capital Flows (June)

US      15.00 NAHB House Builders Sentiment (August)

The Pound declined against the Euro and the Pound  yesterday s it is being weighed down by downward revision of the recent quarterly inflation report. The GBP/USD fell below the 1.5600 support level today, with further downside potential as no relevant economic releases are scheduled for the region until Tuesday. The pair will be trading largely on risk sentiment as well as USD strength.

The Dollar made gains against the Pound while remaining relatively unchanged against the Euro following a weaker global equities market and disappointing US jobless claims data. Initial jobless claims increased to 484k vs. the previous 465k in the week ended August 7, the highest level since February further fuelling investor’s appetite for the low yielding dollar. Currently, the market is trading highly on risk sentiment, therefore increase speculation of an economic slowdown are sending investors to the safe-haven of the Dollar.

The Euro made gains against the Pound while remaining relatively unchanged against the Dollar following a report showing European industrial production unexpectedly contracted in June printing -0.1% vs. the forecasted 0.7%, further adding to the speculation that the global economic recovery may be faltering.
Yesterday’s profit taking selloff was further supported by renewed concerns of Ireland’s sovereign debt risk following a resurfaced larger than expected loss reported from the Bank of Ireland.

Data released 13.08.10

US      13.30 CPI (July)

Ex Food & Energy

US      13.30 Real Earnings (July)

US      13.30 Retail Sales / Ex Autos (July)

US      14.55 Michigan Sentiment (August Prelim)

US      15.00 Business Inventories (June)

The Pound made considerable gains against Euro while declining against the Dollar yesterday as investors flocked to the safety of the Greenback and Yen amidst renewed fears of risk aversion. The market ignored better than expected employment data out of the UK preferring instead to focus on the release of the Bank of England inflation report with the central bank announcing downward revisions to CPI and signalling the possibility for the need of more emergency stimulus.

The Dollar made considerable gains against the Pound and the Euro as risk aversion has reappeared on the horizon over the last 24 hours with several key events changing sentiment on financial markets. In essence fears of a global double dip recession have re-emerged following the U.S Federal Reserve banks dovish statement and the Bank of England following suit last night, downgrading growth forecasts for the U.K.

The Euro declined heavily against the Pound and the Dollar yesterday as it extended its three-day sell-off and has declined more than four big figures this week.  The catalyst was yesterday’s Federal Open Market Committee statement in which Fed policymakers conceded “the pace of recovery in output and employment has slowed in recent months,” decreasing demand for higher-yielding and riskier assets.

In Eurozone news, data released in France yesterday saw the June current account narrow to -€2.7 billion.  Also to note the ECB lent European commercial banks U.S. dollar funds yesterday for the first time in more than two months.

Data released 12.08.10

EU      09.00 ECB Monthly Bulletin Published

EU      10.00 Industrial Production (June)

US      13.30 Export / Import Prices (July)

US      13.30 Initial Jobless Claims (w/e 7th August)

The Pound made gains against the Dollar while remaining relatively unchanged against the Euro as the Pound was aided by the general improvement in market sentiment, as well as merger and acquisition activity.

The Pound was as able to extend its bullish run to its most consistent performance in 18 years against the Dollar. The BoE’s Deputy Governor recently stated that the central bank should not loosen its policy nor buy bonds – a positive sign for rate forecasts. And, Prime Minister Cameron said in a statement that spending cuts would not be reversed when growth took hold – a win for deficits. That being said, the markets will dictate their abilities going forward.

The Dollar declined against the Pound and the Euro as concerns that U.S. may require additional measures to boost its economy.  The Wall street Journal reported on Tuesday that the Fed officials would consider renewing its Treasury or mortgage purchases when they meet on August 10, amid signs U.S. economy may be losing momentum to recover.

The July ISM, released late yesterday, decreased by less than expected helping to ease concerns about the outlook for the US economy ahead of Friday’s release of the crucial non-farm payrolls report for last month. The manufacturing index decreased to 55.5 points from 56.2 in June, well above market estimates for a fall back to 54.0. Market sentiment, though was dented to some extent by overnight comments from the Fed’s Bernanke indicating that the US economy is still far from a full recovery.

The Euro made gains against the Dollar while remaining relatively unchanged against the Pound aided by decent manufacturing data from the Eurozone, as well as a spike in risk appetite on the back of some better than anticipated US data.

Data released 04.08.10

UK      09.28 CIPS Services PMI (July)

EU      10.00 Retail Sales (June)

US      13.30 ADP Employment (July)

US      15.00 ISM Non-Manufacturing (July)

Business Activity

The Pound made gains against the Euro and the Dollar benefiting from an increase in risk appetite and data showing that the UK’s manufacturing sector performed better than expected in the first half of the year, and growth is expected to outstrip the rest of the economy, according to the EEF.  The industry trade body said it forecast growth in manufacturing of 3.8% this year.

The Dollar declined against the Pound while making gains against the Euro following mixed economic data. US GDP growth slows to 2.4% annualised in Q2, very close to expectations. The Q2 GDP breakdown showed slower consumer spending growth and a surge in housing spending, which certainly won’t be sustained now that the tax credit for homebuyers has expired.

US employment cost index showed a slower 0.5% growth pace in Q2, due to a pull-back in the pace of benefits growth from their Q1 spike; the underlying picture remains subdued, even though annual ECI growth has accelerated modestly.

US Chicago PMI at 62.3 surprised to the upside in July, in contrast to the generally soft message from the various regional Fed factory surveys. Somewhat counter-intuitively, the national ISM factory index tends to track more closely with the Fed surveys than with its own regional PMI cousins, so we are comfortable sticking with our forecast that the ISM on Monday will ease from June’s 56.2 to 54.0 in July.

The Euro declined against the Pound while making gains against the Dollar on Friday as German retail sales fell 0.9% in June while Euro land unemployment remained stagnant coming in at 10.0% in June.

Data released 02.08.10

UK      09.30 CIPS Manufacturing PMI (July) 57.5 57.0

US      15.00 Construction Spending (June) -0.2% -0.5%

US      15.00 ISM Manufacturing (July)

Exchange rates

GBP/EUR 1.2086

GBP/USD 1.5790

EUR/USD 1.3061