Can The Pound Withstand Another Negative Data Release?

This morning has bared an uncanny resemblance to yesterday after the strengthening Pound was abruptly stopped in its tracks by a data release at 9.30am that came in below expectations.

Pound Sterling – UK Markets

Yesterday it was PMI construction data that disappointed and today it was the same story with PMI services data. The services figures were expected to come in at 54.8 but came in at 53.1 this morning causing Sterling to drop. Should this follow yesterday’s pattern however, this may only be a temporary blip before Sterling regains its climb – although these negative news releases are sure to start weighing on the mind of investors should they continue over the week. The rate against the main trading counterparts still stood at a healthy 1.5901 against the US Dollar and 1.2048 against the Euro at 10 am this morning. News on profit from Lloyds has added to the positive news from HSBC, helping increase confidence in the banking sector. Pre-tax profit for Lloyds has been posted as £1.6 billion for the first half of 2010 in stark contrast to the same time last year when it lost £4 billion. The bank is still 41 percent owed by the Government. Halifax have also provided some positive news on the housing market – house prices rose for the most in four months in July as low interest rates and further recovery boosted demand for homes.

US Dollar – US Markets

The Dollar’s sorry tale is still continuing following yet more negative news and data releases. The latest additions to the US’s mounting woes were yesterday’s consumer spending, home sales and factory order statistics which all came in weaker than expected. As the uninspiring economic data mounts, speculation is increasing on whether the Federal Reserve will introduce further stimulus measures to boost the economy which will not help the Dollar. Today does not promise much more hope – a long list of data releases including mortgage applications, job cuts, employment change, crude oil stocks and non-manufacturing statistics are all due suggesting a volatile day may be ahead.

Euro – European Markets

The Euro was expected to be boosted today by German PMI data and other Euro zone economic data. So far this morning the data has not been as inspiring as was hoped. Retail sales for June have come in flat at 0.0 percent showing no change from the previous month. The Euro-wide PMI services data was expected to increase from 54.8 to 57.3 but only managed to increase as far as 56.5. Tomorrow’s meeting between the European Central Bank and Bank of England is expected to have little effect on the rates leaving monetary policy unchanged. The Swiss central bank has been in the spotlight for protecting its economy by adopting a similar currency policy to China. The surge in the Swiss Franc had threatened to derail the Swiss economy and damage exports so the National Bank had quadrupled its foreign exchange holdings since March 2009 to slow the currency’s advance.

Other Currencies – Highlights

The further influx of negative news on the US economy has caused the Japanese Yen to advance against all of its major counterparts and to reach an eight-month high against the Dollar. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.