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Daily FX Market Commentary

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The USD

There have been a number of changes to the GBP USD during the last few weeks, notably from the interest rate rise undertaken by the Federal Reserve last year in December. This strength has continued to press on the Pound especially when combined with a hesitation from our own central bank to move interest rates as previously hinted at.

Today, we are expecting a range of data releases that track changes to the manufacturing industry – a significant contributor to the overall GDP figure – known as Manufacturing PMI (Purchasing Managers Index). The US figure today is expected to show a contraction which is seen as a negative sign given it indicates a slow down in purchasing orders by those working in manufacturing sector companies as they expect less orders themselves.

To accompany the manufacturing figures there are also a range of personal consumer information data releases to show changes to personal income and personal expenditure and across these figures, again a contraction is expected – potentially pointing to a weaker day for the USD.

The EUR

There is an absence of data today for the EUR except for a speech set by Mario Draghi, the European Central Bank President. His speech in December disappointed investors by explaining that they would not deliver the major stimulus packages that analysts widely believed that were needed to underpin support in the region. However, since then, the Euro has made significant advances against the pound.

Given that so much economic contribution comes from nations that export more than they import, it can be a tricky mix for the ECB, attempting to navigate the value of the Euro currency when this affects how affordable their exports are on a global scale – often a deliberate devalue of the Euro is the agenda.

The GBP

Like the US data expected today, on the cards for the UK is a release of our UK PMI figures. The information expected today is forecast to show a slight slow down in the speed at which the orders made by purchasing managers in the manufacturing industry are growing. So, contrary to the US forecast, we are growing but just at a slightly slower pace than last month.

Adjacent to the PMI figures to be released today are some information sets that comment on consumer lending and mortgage approvals. In both cases a slight reduction is expected of these figures and this could be a delayed response to an expected increase in interest rates, as consumers back off lending in the face of a potential increase in costs.