gbp fundamentals

Euro, British Pound Edge Higher in Choppy Day of Trading

Wednesday, 30 September 2009 20:09:25 GMT  |  Terri Belkas, Currency Strategist

The euro and British pound gained against the US dollar, but were mostly weaker against the rest of the majors on Wednesday as demand really only worked in favor of the commodity dollars. There was little in the way of UK news, but the euro did gain following a European Central Bank report that showed banks only bid to borrow 75.2 billion euros at the current benchmark interest rate of 1 percent in its second 12-month auction, which was much less than anticipated, after the ECB loaned a record 442 billion euros following its first auction in June. ECB Governing Council member Marko Kranjec said that the lower demand “shows the system is liquid enough and that banks don’t need funds so much,” suggesting that the central bank's emergency liquidity measures may not be necessary for much longer.

The final reading of the purchasing managers' index (PMI) for the Euro-zone's manufacturing sector is due to be released at 4:00 ET on Thursday, but no revisions are expected. Indeed, the September result is anticipated to go unrevised from the initial reading of 49.0, which marks an improvement from August but also represents the sixteenth straight month that PMI has held below 50, signaling a continued contraction in business activity. At 4:30 ET, the UK’s manufacturing PMI is anticipated to rise to 50.2 for the month of September from 49.7, which would match the July result and signal that the sector is seeing signs of growth. However, it will take more consistent evidence anyone can claim the beleaguered economy is in recovery mode.

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