Rational FX: GBP gains half a cent against USD [05/01/2011]

• In the UK yesterday we had the M4 money supply which came in at -0.8 which, with small decrease expected, actually came in worse than was expected with a considerable decrease.
• The M4 money supply had little effect on the market however when mortgage approvals came in higher than expected, coupled with the purchasing manager index manufacturing figures for December also coming in higher than expected, then this saw GBP gain near half a cent against USD.
• In the Euro zone yesterday the only data out was the German unemployment rate which came out flat and resulted with little effect on the market. The unemployment change figure came out at 3,000 which is a lot higher than the expected -12,000, meaning that more people are claiming benefits in Germany. Again this had little effect on the market.
• In the US the Factory orders came out considerably higher than expected which saw the USD strengthen against the GBP as this offers a good insight into inflation and growth in the US economy.
• The FOMC minutes came out late last night and the main focus was on the backing of the QE2 programme, with the FED maintaining its position to stick with the asset purchase programme.

Today’s Market Movers

• The only data out in the UK today is the PMI Construction figures, which are expected to come in slightly lower than previous.
• Both the German and European Monetary Union Purchasing Manager Index Services come out today and are both expected to come in lower than previous, which could cause some volatility for the EUR.
• Continuing a busy day in the Euro zone today is the release of the of the Industrial New Orders for the European Monetary Union, which are expected to come in higher both month on month and year on year. These capture the values of new contracts for goods in the manufacturing sector.
• The final release in the Euro Zone is the PPI which is expected to come in slightly lower than previous month on month, despite remaining flat year on year.
• In the US today there is the release of the ADP Employment change for December. This is expected to come in higher than previous which could see the USD strengthen.
• The ISM non-manufacturing index is the final piece of data released in the US today and shows business conditions in the non-manufacturing sector. This is expected to come in slightly better than previous.