Pound to Euro, US Dollar exchange rate: The Pound started the day well yesterday reclaiming some of Monday’s losses

The Pound started the day well yesterday reclaiming some of Monday's losses.The Pound rallied by around 0.5 cents against the Euro yesterday, settling just over 1.2600 for the majority of the day in reaction to the better-than-expected Production figures and in response to the news that the Italian economy shrank by -0.7% in the second quarter.

  • UK Industrial Manufacturing fall – Production down by less-than-anticipated.
  • Italian GDP shrinks – -0.7% as austerity proves harmful.
  • Canadian Ivey PMI grows – from 49.0 to 62.8 in July..
  • ‘Kiwi’ slides – PM says rate cuts possible.

Sterling

The Pound started the day well yesterday reclaiming some of Monday’s losses rather efficiently as markets reacted positively to the news that annualised Industrial Production and Manufacturing Production figures had not shrank by as much as was first thought. Initially Industrial Production was expected to decline by -5.3%, and Manufacturing by -5.7%, however the figure for both statistics came in at -4.3%, a 3-year low rather than a decade-defining poor result.

Although the better-than-expected stats suggest that a minor upward revision could be made to last month’s dismal GDP print of -0.7% contraction, the wider implications for the UK economy remain bleak. The Bank of England’s Inflation Report, released this morning, is expected to show downgrades to GDP growth and inflation prospects from the Central Bank. If this proves to be the case then it will increase the likelihood of further quantitative easing measures or an interest rate cut which will weigh on Sterling. The Pound is already falling in anticipation of negative rhetoric from Mervyn King and co

Euro

The Pound rallied by around 0.5 cents against the Euro yesterday, settling just over 1.2600 for the majority of the day in reaction to the better-than-expected Production figures and in response to the news that the Italian economy shrank by -0.7% in the second quarter.

Annualised Industrial Production in Italy shrank by -8.2% in June, which contributed to Italy’s 12th consecutive month of recession. Italy has struggled to grow for many years, between 2000 and 2010 Italian GDP only increased from €1.191 trillion to €1.221 trillion, but with Mario Monti’s austerity plans – tax hikes, spending cuts, job losses – negatively impacting Gross Domestic Product even further it is hard to see how the country can revive itself from this mess.

Later on in the afternoon Italian Prime Minister Monti was given final approval for his latest round of cuts, a further €4 billion, as the cost of trying to get the country’s finances back on track threatens to extend out of the struggling nation’s reach. The latest austerity measures include, a 10% cut in public officials, huge cuts to ministries, local governmental reform, and national health service reductions.

German Factory Orders also fell to an extremely weak level of -7.8% yesterday, but the single currency’s blushes were spared and the Euro did not fall too far. It seems that investors took the heightened negative ecostats to suggest that the European Central Bank may accelerate the implementation of its bond-buying revival scheme.

US Dollar

The Pound rose by around 1.2 cents to a weekly high of 1.5683 against the US Dollar yesterday but Sterling was unable to hold onto its gains through the afternoon as the Office for National Statistics released a report suggesting that the UK economy has continued to contract by -0.2% in the months up to July. The data also suggested that the British economy would struggle to return to its 2008 pre-crisis peak before 2014. As a result the safety of the US Dollar appealed to investors and the ‘Greenback’ prevailed.

Consumer Credit in the US fell from $16.698 billion to $6.459 billion, but the disappointing data was not enough to deter safe haven flows, especially with the Bank of England’s Quarterly Inflation Report expected to weaken UK prospects further this morning.

Canadian Dollar

The Pound fell by around 1 cent against the Canadian Dollar yesterday as the ONS’ suggestion of further recession in the UK halted the Pound’s morning rally and an impressive Canadian Ivey PMI result tickled markets into investing in the Canadian Dollar. In July the Ivey PMI figure rose to a 4-month high of 62.8, from only 49.0 in June which boosted the ‘Loonie’ and suggested that the Canadian economy may be on the verge of picking up its pace from earlier in the year.

Australian Dollar

The Pound managed to achieve a day of respite versus the Australian Dollar yesterday, marking only the 2nd positive day for Sterling in the last 10. The Pound appreciated by just under a cent against the Antipodean currency as poor Italian GDP data in the morning hindered risk sentiment trends, and stronger-than-expected Production results from the UK’s Industrial and Manufacturing sectors supported Sterling against its higher-yielding Australian counterpart.

New Zealand Dollar

With risk appetite stalling somewhat, and New Zealand Prime Minister John Key commenting that the Reserve Bank of New Zealand have the capacity to lower interest rates in order to compliment the government’s fiscal efforts, the New Zealand Dollar found itself the worst performer of the day. The Pound to New Zealand Dollar exchange rate improved by around 1.8 cents to a daily high of 1.9226 in response to the rate cut rumours.

Data Released Today

09:30 GBP Bank of England Inflation Report

10:00 EUR German Industrial Production n.s.a. and w.d.a. (YoY) (JUN) 0.3%

22:45 NZD Unemployment Rate (2Q) 6.5%

Related posts:

  1. Pound Sterling, the Euro and US Dollar exchange rate News – The Pound has swung between gains and losses in the past week
  2. The Pound is trading slightly down from yesterday at 1.208 against the Euro exchange rate
  3. Pound Sterling, the Euro and US Dollar exchange rate currency news – The Pound declined against the Dollar yesterday
  4. Pound Sterling, the Euro and US Dollar exchange rate News – The Pound received a timely boost yesterday, rising back up through 1.13 versus the Euro exchange rate
  5. The Canadian Dollar has started this week’s session firmly under the cosh

Article source: http://feedproxy.google.com/~r/ForeignExchangeOutlook/~3/v8CDlx0lHpU/

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