Pound:
Sterling dropped to a three week low versus the dollar yesterday after manufacturing activity data painted a slightly healthier economic picture in the United States than the UK, leaving the pound vulnerable to further losses. The pound was down 0.6 percent at $1.6153, off a session trough of $1.6132, its lowest level since August 11. It dived after ISM figures showed US activity grew marginally in August. Sterling had earlier fallen on a UK manufacturing survey, which showed UK manufacturing activity shrank at its fastest pace in more than two years in August, hurt by a sharp drop in demand for exports, and adding to concerns Britain’s economic recov¬ery is stalling. It was not all doom and gloom for the pound however, as it snapped a week low to gain over a cent on the euro.
Data 09.30: Construction PMI
Euro:
The euro extended the decline from earlier this week, with the exchange rate slipping to a low of 1.4208, and the reversal from 1.4548 may gather pace as there appears to be a growing rift amongst European officials. Bundesbank President Jens Weidmann argued that the ECB needs to ‘Scale back the extra risks monetary policy has taken on,’ while lawmakers in Germany made a push to have greater control to vote on a second bailout package for Greece later this month. As European policy makers struggle to get their house in order, we are likely to see an increased reliance on the ECB to address the near term risks for the region, but the Governing Council may come under increased scrutiny as it goes beyond its one and only mandate to ensure price stability. Going forward we may see the euro weaken further as we expect the central bank to strike a dovish tone at the interest rate decision scheduled for the following week.
No Major Data due.
Dollar:
Hiring probably slowed in August as American companies became less optimistic about the strength of the recovery, economists said before a report today. According to a median of economists payrolls climbed by 68,000 workers after a 117,000 increase in July. The unemployment rate probably held at 9.1 percent, marking 26 out of the last 28 months where it has been at or above 9 percent. The first credit downgrade in US history, political squabbling over debt reduction and fear of a default in Europe caused the Standard & Poor’s 500 Index to plum¬met 17 percent from July 22 to August 8, probably prompting companies to cut back. The lack of hiring is one reason Federal Reserve Chairman Ben Bernanke last week said the central bank still has tools available to stimulate growth.
Data 13.30: Non Farm Employment Change; Unemployment Rate.
General:
• The Swiss franc and yen strengthened before data forecast to show that US job growth slowed last month and on reports the Federal government will sue banks over mortgage backed securities.
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GBP/USD 1.6180
GBP/EUR 1.1380
EUR/USD 1.4225
GBP/JPY 124.30
GBP/AUD 1.5140
GBP/NZD 1.9040
GBP/ZAR 11.3540
GBP/CHF 1.2720
GBP/CAD 1.5830
GBP/SGD 1.9480
GBP/THB 48.40
GBP/HKD 12.6050
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These rates are for indication purposes only.
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