Pound falls. Lots of UK data today

Market Snapshot, 30 July 2009 @ 08:30am :

  • GBPEUR 1.1560
  • GBPUSD 1.6375
  • GBPNZD 2.4932
  • GBPAUD 1.9950
  • GBPCAD 1.7778
  • GBPCHF 1.7596
  • GBPZAR 12.924
  • GBPJPY 153.91

Trading Yesterday:

Sterling fell yesterday, retreating from earlier gains made earlier this week against both EUR and USD. It was as Britain’s main stock index turned negative and data showed UK retail sales fell faster than expected in July that caused the fall.

Adarsh Sinha, a currency analyst at Barclays Capital said the pound slipped in line with equities but was more generally struggling to keep in step with gains in other pro-cyclical units following a strong performance earlier in the summer.

“Sterling has sort of been underperforming the other more risky currencies in general,” he said. “What really matters for sterling is what happens in banking stocks.”

The currency edged down a touch after data from the Confederation of British Industry showing British retail sales fell faster than expected in July but slower than in June. Overall, the pound’s reaction to the data was limited. Sterling came under further pressure after weaker-than-expected U.S. consumer confidence data.

There was some recovery however, after a senior UK Treasury source told Reuters inflation could become a problem once again when the global economy recovers, adding the threat of deflation has receded.

Australia gives the pound a heling hand…
Despite sterling’s slide, the currency was supported by a climb in the Australian dollar after comments early on Tuesday from the governor of the Reserve Bank of Australia. He suggested that interest rates in the UK may rise.

Higher rates mean a better return for investors, and so more of these investors purchase Sterling, pushing the value higher. It’s the recent cuts and low rates here in the UK that have helped to weaken the pound so much over the last 9 months.

Todays UK Data
As I pointed out on Monday, today has lots of UK data, most released at 09:30am. Expect rates to change from the snapshot above, as investors move Sterling depending on how good or bad the figures are. Let’s take a detailed look at what this data actually is…

M4 Money Supply – measures all the sterling in circulation, encompassing notes and coins as well as money held in bank accounts. It is considered as an important indicator of inflation, as monetary expansion adds pressure to the exchange rates. An acceleration of the M4 money is considered as positive for the GBP, whereas a decline is negative.

Consumer Credit – is an amount of money that individuals borrowed in the previous month. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means

Mortgage Approvals – The Bank of England presents the number of various Mortgage Approvals. It is considered as a leading indicator of the UK Housing Market. A Mortgage growth represents a healthy housing market that stimulates the overall UK economy.

Elsewhere, we have some info from the USA this afternoon; Mortgage Applications, Durable Goods Orders & Crude Oil Stocks.

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