Exchange Rates and Market Commentary [09/11/2011]

Exchange Rates and Market Commentary [09/11/2011]

Good morning and welcome to today’s foreign exchange daily market commentary on the 9th of November.

Italian PM Silvio Berlusconi is all set to bow out after the parliament passes a budget law that includes the reforms demanded by EU members to fend off a Greece style sovereign debt crisis. Rome’s debt burden at €1.9 trillion is much bigger and overshadows Athens’ problems completely. However, Berlusconi’s exit will take place until 2012 and is expected restore some confidence in the EU region. The yields on 10 year Italian debts continued to rise yesterday touching a fresh high of 6.74%. There is a distinct possibility of the ECB intervening to buy Italian bonds if yields touch the 7% mark.

Meanwhile Russia has expressed confidence that Italy will be able to get its act together, bust raised apprehensions about Europe’s ability to contain a contagion. “The situation is difficult in Greece and Italy. But, as I understand it, Berlusconi will go only after the budget and financial stability measures are passed,” said Kremlin aide Arkady Dvorkovich to reporters.

Russian foreign exchange reserve is estimated at $500 billion, roughly 40 per cent of which are euro zone sovereign debt. Terming the Italian plan “sufficient”, Dvorkovich said Russia doesn’t understand how the EU will implement the proposed €1 trillion EFSF expansion.

“We do not fully understand how the EFSF will be topped up and will function … We do not understand where the additional 750 billion Euros will come from. If Europe takes clear decisions (on expanding EFSF), then we would consider participating, but that does not mean we would agree,” he said.

The ECB can play a more proactive role and there’s no harm if it chooses to print more money to buy government assets, Dvorkovich noted.

FOREIGN EXCHANGE DAILY MARKET RATES OVERVIEW

GBP/EURO – 1.1648
GBP/US$ – 1.6089
GBP/CHF – 1.4403
GBP/CAN$ – 1.6265
GBP/AUS$ – 1.5549
GBP/ZAR – 12.6567
GBP/JPY – 124.74
GBP/HKD – 12.4922
GBP/NZD – 2.0194
GBP/SEK – 10.5431

If your currency pairing is not listed above and you want to make a currency transfer, check out our comparison tables at www.mycurrencytransfer.com for the best foreign exchange rates.

Euro: The common currency lost ground against the cable yesterday as both Greece and Italy weighed down investors’ risk appetite. Data released by the National Institute of Economic and Social Research showed UK’s economy expanded by 0.5% in the quarter to October, easing fears of the economy slipping back to recession. This weakened the Euro further as the markets perceive the UK a much safer bet as far as deficit reduction is concerned. The GBP/EUR slipped by about 40 pips though it had recovered most of the lost ground by day end. The GBP/EUR pair opens at 1.1678 this morning.

USD: Sterling gained against the USD yesterday after better than expected UK economic data helped ease investors’ concern. Fall of Chinese inflation also boosted investor confidence and more people are seeking exposure to riskier assets. GBP/USD rose to a high of 1.6130 yesterday over positive economic news from the UK.

Elsewhere, Canadian dollar lost ground against most of its major counterparts. The AUD and the NZD also retreated against the greenback over Italy’s political uncertainty.

Have a great day.

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