Currency market updates - from Foreign Currency Direct (www.currencies.co.uk)

Tuesday 4th September 2007

By Colm Gilhooly - Desk Manager

UK Manufacturing Boost

UK manufacturing experienced stronger than forecast growth in orders and output with the Chartered Institute of Purchasing and Supply’s PMI (Purchasing Manager’s Index) up from 55.9 in July to 56.3 in August.  Any figure over 50 signifies growth and the data was supported by a report from the EEF business group which reported that UK manufacturers have recorded their high growth in orders since 1995.  EEF Chief Economist Steve Radley stated “Long gone are the days when a strong currency and increases in interest rates would have stopped companies in their tracks.”  The news helped Sterling gain nearly 0.75c from Fridays trading as analysts are more optimistic about the outlook for the UK manufacturing sector.

Data wasn’t so favourable for the retail sector with last nights British Retail Consortium’s latest figures showing that although annual like for like sales rose 1.8% in August (and this was well above the 1.2% increase seen in July) it was the second worst monthly performance this year.  The recent interest rate hikes and poor weather have been keeping shoppers away from the high street and the poor data will only add to growing pressure on the Bank of England’s Monetary Policy Committee not to raise interest rates this week.  Sterling is currently at its highest level against the Euro for the last couple of weeks and it looks as though it could be a volatile period given that we have both the UK and European interest rate decisions due on Thursday.  On top of that there are retail sales figures and inflation data out for the Eurozone this morning at 10.00, and tomorrow there are services PMI figures for the UK and Europe- this may provide for a fairly bumpy time in the currency markets in the run up to the rate decisions so if you would prefer to take advantage of the current highs then feel free to contact your account manager about buying now or fixing forward.

Trading Resumes In US

The US markets will be open for business again today after the market holiday yesterday.  The important events this week will be the Institute for Supply Management’s manufacturing results this afternoon, a number of releases on Thursday including jobless claims, but with the most important one being the non-farms payroll data out at 13.30 on Friday.  Analysts predict a moderate 118,000 worker gain in non-farm payrolls, up from July's low 92,000.  Non-farms data is often different to the expected figures and at times can cause the Sterling Dollar rate to move significantly.  If at the minute you are sitting on the fence, it may be worth keeping a very close eye on events on Friday to ensure you don’t miss out due to the potential market movement.

Other important releases for those of you moving to Canada or Australia will be the respective central banks rate decisions.  Canada’s being tomorrow on the 5th of September and the Australian equivalent meeting starting today and finishing tomorrow.  Most forecasts are for a hold but any upward change to this may see the respective Dollars gain ground on Sterling.