Surging UK export demand fails to lift Sterling

Despite very strong news on the growing UK export market, the week is starting with a downwards slide in Sterling. At 10.30 am GMT the mid market Sterling rate was 1.5398 against the US Dollar and 1.1944 against the Euro.

Pound Sterling – UK Markets

A surging export market has been credited for the latest UK factory production figures which have grown at a record pace throughout the third quarter. 33 percent more manufacturers reported rising sales than those reporting declines according to the Engineering Employers Federation and BDO Stoy Hayward LLP. This is the highest figure since the gauge began in 1995 and may inspire confidence that the UK export market will be key to aiding economic recovery. Despite the good news the Pound is dropping against the US Dollar and the Euro so far today. This has been attributed to the culmination of last week’s negative UK data emphasising the fragile economy and causing anxiety about the effect of budget cuts. The next Bank of England policy makers meeting is on Wednesday where it is widely expected that the interest rate will be held at 0.5 percent and asset purchases will be maintained at £200 billion. Poor data has come in regarding new car sales in the UK adding to last week’s negative economic data – figures from the Society of Motor Manufacturers and Traders has shown that there were 55, 305 new cars registered in August which is down 17.5 percent compared with August 2009.

US Dollar – US Markets

Today is Labor Day in the US and despite the markets being closed the Dollar is gaining on the Euro and the Pound. This has continued from Friday when the Dollar fell against most currencies as much better than expected US jobs figures dampened demand for the currency as a refuge and increased appetite for riskier currencies. The Labor department revealed that employment fell by 54,000 overall - far lower than the anticipated 100,000. US private payrolls excluding Government agencies climbed by 67,000.

Euro – European Markets

This morning has revealed an unexpected drop in investor confidence towards the Euro zone economy by the Sentix survey and the Euro is losing out to the Dollar. The Euro-zone is expected to receive some positive data this week however, particularly reinforcing the growing recovery in Germany with factory orders tomorrow anticipated to have risen by 0.5 percent and industrial production by 1 percent. Last week, the European Central Bank raised its 2010 economic growth forecast from 1 to 1.6percent.

Other Currencies – Highlights

Members of The Bank of Japan have begun a two day meeting where it is expected that a commitment to credit easing measures may be continued. The Yen has fallen following a break in the recent stint of risk-aversion techniques being used by investors who had heavily invested in the currency. Increased risk appetite has boosted the Australian Dollar and tomorrow sees the interest rate decision of the Australian Bank with the expectation that rates will be unchanged for the fourth month in a row. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.