Foreign Currency Exchange Report 09 August 2010

09 August 2010

 

US Dollar

 

The US Dollar registered broad declines on Friday as key jobs data knocked confidence about the strength of the economic recovery. The US economy shed 131,000 jobs in July with 143,000 public sector census workers being laid off, according to figures from the Labor Department. Private non-farm payrolls expanded by 71,000 in July compared with the 83,000 jobs created in June. Economists had forecast the private sector would add 100,000 jobs in July. The unemployment rate was steady at 9.5%, better than expectations of a rise to 9.6%.

Friday's jobs figures added to an ever more sombre picture of the recovery and increased expectations that the Federal Reserve could announce new stimulus measures at its meeting this Tuesday.

The US Dollar almost touched a 15 month low against the Yen while the Euro rose to $1.33 a three-month high. Data and market expectation caused the Greenback to weaken to a six month low against Sterling.

 

Sterling

 

Sterling gains against major currencies are limited as the Pound hovers near a key resistance level. After climbing as high as $1.5998 in early trading, analysts took a stab at the key psychological level of $1.600.A rise above this level would take the Pound exchange rate to its highest since early February.

 

In addition to the weak Dollar exchange rate, Sterling has been bolstered by the view that the UK economy is recovering following some solid data in the past month or so and buoyant earnings reports from UK financial institutions. General Pound bullishness prompted many investors to shrug off a weak reading of British industrial production on Friday. Markets await figures on UK retail sales and the nation's labour market this week, as well as the Bank of England's quarterly inflation report due on Wednesday.

 

The central bank's latest price projections are likely to suggest more subdued growth over the next two years than in the previous report in May, due to massive spending cuts announced by the new coalition government. But, the inflation forecast may be significantly higher to account for a rise in value-added tax from next year. Such a view would add to the BOE's dilemma of how to control price pressures without undermining a still fragile recovery.

 

Please contact Foreign Currency Exchange on +44 (0) 20 7989 0000 to discuss your currency exchange requirements.