Foreign Exchange Insight : Positive US Durable Goods Numbers Drive GBP USD Rate Lower While Euro Rides Out More Worrying German Data
The Pound Euro exchange rate (GBP EUR) is 1.1360. The Pound Dollar exchange rate (GBP USD) is 1.6371. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5688.
Yesterday?s session in the currency markets was marked by the resurgence of the US Dollar following the release of July?s US Durable Goods figure.
The closely-watched figure measures the volume of purchases of products which are expected to last over three years by US citizens. Such goods are ordinarily larger ticket purchases, including kitchen white wares and electrical appliances and the figure is traditionally viewed as an indicator of optimism regarding the future prospects of the world?s largest economy. Analysts had expected last month?s US Durable Goods number to show an increase of 2.0%, but the figure cofounded expectations by printing at 4.0%, a significant improvement on June?s corresponding number of -1.9%.
The GBP USD rate dipped from above the 1.6500 level in the lead up to yesterday?s durable goods data to briefly trade down to 1.6366 just after the European equities close.
The Dollar?s gains on the day were also attributable to rumours regarding the content of Federal Reserve Chairman Ben Bernanke?s set piece speech to the central bankers? summit at Jackson Hole on Friday. Bernanke used last year?s counterpart speech to unveil further quantitative easing as a policy option for the Fed, causing the Greenback to trade sharply lower. Any suggestion from Bernanke that QE3 may be on the agenda would be likely to have a similar effect. The fact that the Dollar has firmed in the lead up to the summit suggests that market participants believe that Bernanke will refrain from announcing a further loosening of US monetary policy.
Elsewhere, the Euro made modest gains against most of the other majors yesterday in spite of the release of the second disappointing German economic sentiment survey in two days. Yesterday?s August IFO Business Climate Survey showed a sharp drop from July?s corresponding figure, causing investors to air concern?s that the Eurozone?s leading economy is facing an economic slow-down. Last week?s disappointing German Q2 growth figure would appear to confirm these fears.
At the moment, market participants appear willing to put worries over a weak German economy to the back of their minds, instead concentrating on hopes for a return to normal trading with Libya, the provider of a vast tranche of the Eurozone?s oil consumption. With the GBP EUR rate dropping back into the mid-1.13s on the day, it seems that ?no news was good news? for investors worried about ongoing Eurozone sovereign debt problems.
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Source: http://www.currencynews.co.uk/forecast/20110825-700_forex-report-gbp-usd-rate-lower.html
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