Welcome to the Pure FX account of the latest changes in the foreign exchange rates.
This is intended as a brief guide to movements in the exchange rates overnight, to put you in the best position when you exchange currencies.
The US dollar climbed against the pound and euro overnight, as disappointing manufacturing data in the US points to a slowdown.
The ISM manufacturing index fell to 49.6 in August, the third consecutive poll beneath the 50.0 point which separates expansion from contraction. As Jim O’Sullivan, chief US economist at High Frequency Economics, points out, this indicates “a significant loss of momentum in manufacturing in recent months.” In fact, this is the longest continuous period of decline since the US was in recession, back in June 2009.
Hence, the US dollar gained as investors used this as an excuse to sell risk-based assets, and turn to the US as a safe haven.
The UK pound meanwhile climbed against most currencies except the US dollar overnight, both because it too is a safe haven, and because data from the country’s dominate Services sector points to the end of the recession.
The UK services PMI reached 53.7 in August, ahead of forecasts for a 51.1 result and the best result in five months. As Vicky Redwood of Capital Economics points out, this data suggests “the economy may just about be clawing its way out of recession.”
Hence the rising pound.
The Eurozone debt crisis looks set to regain our attention again before long. This is because, tomorrow, president of the European Central Bank Mario Draghi is set to unveil his scheme to buy Spanish and Italian government bonds.
If the scheme is convincing, it could not only take the Eurozone a significant step closer to ending its debt crisis, but aid the euro too.
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