Week ends with UK banking profits in the spotlight

RBS are the latest bank to announce profits above forecast highlighting the up turn in the UK economy in the second quarter of this year. The Pound however has taken a tumble this morning as manufacturing, industrial and producer price data has come in lower than expected.

Pound Sterling – UK Markets

After hitting a six month high against the US Dollar earlier in the week, Sterling has become more fragile finding some resistance against the Dollar and also suffering from negative data releases this morning in the area of manufacturing production, industrial and producer price data. The Pound was at 1.5857 against the US Dollar and 1.2044 against the Euro at 11am this morning. Banking profits are again in the spotlight however as RBS has followed suit with Barclays, HSBC and Lloyds announcing profits that have come in above expectation this week. The bank has swung back into profit for the first time since 2007 with a pre-tax profit of £1.14 billion in the second quarter this year following a loss of £21 million in the first quarter. The bank is now on track for meeting its five year goals. Along with the profits announced by other banks, this should help stoke up investor confidence in the UK recovery.

US Dollar – US Markets

Today’s jobs report at 12.30 pm UK time is the focus for markets which is likely to influence the Dollar’s movement over the next few days. Expectations are for a rise to 9.6 percent in the unemployment rate and a loss of 65,000 jobs in July. A poor result today will intensify fears that the Federal Reserve will decide to introduce further stimulus measures at its policy meeting next week. The Dollar Index which measures the US Dollar against a basket of other currencies is currently heading for its longest amount of weekly declines since 2004.

Euro – European Markets

The European Central Bank kept rates unmoved yesterday at 1 percent which came as little surprise. The Euro experienced some positive movement however as President Jean Claude Trichet spoke out about how the Euro zone is recovering faster than expected, stoking confidence. This morning however, German industrial production data has come in surprisingly lower than expected at -0.6 percent rather than the expected 1.1 percent. The Euro has started to lose ground to other major currencies and there may be some volatility ahead.

Other Currencies – Highlights

The Yen has weakened against most major counterparts as gains in Asian stocks caused demand for the Japanese currency to weaken. The Canadian Dollar has traded near to a three month high against the US Dollar as Canadian employment figures are expected to rise. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000