Foreign Currency Exchange Report 27 July 2010

Sterling

Sterling hit a 3-month high against the US Dollar on Monday and performed well across the board as investors remained positive after Friday's preliminary GDP figures, showed the UK economy is growing almost twice as fast as economists expected in the second quarter and the fact that none of the 7 banks that failed the stress tests came from the UK.  However, yesterday afternoon the Pound exchange rate did suffer a sell off against the Euro after decent data in the US promoted risk appetite across all markets and investors bought into the riskier Euro.  With no significant announcements due till Thursday in the UK, it will trade broadly in line with the merits of its peers before Mortgage Approvals and GFK Consumer Confidence data gives investors a clear indication as to the state of play.

Data released today

CBI Reported Sales figures announced

Euro

In Monday's trading the Euro breached the technically and psychologically important 1.30 level against the US Dollar for the 3^rd time this month.  Friday's bank stress test results have not hurt the single currency despite many analysts writing them off as worthless and what does not hurt you, makes you stronger.  Whilst the Euro exchange rate continues to perform strongly against nearly all the majors, against the Pound it's fortune remains mixed.  With both currencies viewed in the same light, trading remains range bound as investors wait for any significant news to dictate which direction the pair will move next.

In today's trading German consumer confidence and import price figures are announced.  Any clients with Euros to either buy or sell should keep in close contact with their currency broker to ensure that opportunities are not missed over the coming days.

US Dollar

The US Dollar exchange rate traded lower against every major currency yesterday and the selling exacerbated following the US housing market report, which helped to promote risk appetite following the better than expected stress test results of Friday.

The first piece of US economic data this week surprised to the upside with new home sales rising by 23.6 percent, the strongest percentage gain in 30 years.  Compared to the market's forecast for a gain of only 3.3 percent, the pickup in sales implies that the housing market may not be as weak as the existing home sales data suggests.  However, investors should not mistake the rebound for a full blown recovery in housing because new home sales fell to a record low in May.

Data released today

Consumer Confidence and the Richmond FED manufacturing Index

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