Good morning and welcome to today’s foreign exchange market commentary on Tuesday the 10th of January.
Yesterday’s meeting between Chancellor Merkel and President Sarkozy yielded very little result on the ground. There was a talk of fiscal union treaty among EU members being signed by the end of January or at the latest by March this year. However, there was an unexpected turn over the Fiscal Transaction Tax – an issue that had kicked off a controversy forcing Prime Minister Cameron to veto the move to protect the City of London’s position, as Chancellor Merkel announcing her own party is divided on the issue.
“We don’t have an agreement on this within the government, but personally I will campaign for (it),” Ms Merkel said a on the proposed FTT.
Earlier Mr. Sarkozy, who faces elections in April, said it remained his top priority and a separate plan for French FTT will be presented by January end. “If we don’t show the example, it will not be done,” he said while meeting Ms Merkel in Berlin in a pre-summit meeting.
Meanwhile, the British Chambers of Commerce in its quarterly survey warned that the UK risks significant slowdown due to the eurozone crisis and if the government doesn’t take immediate steps to restore market confidence, the economy may shrink further. UK manufacturing and services sector have witnessed broad-based weakness in the fourth quarter of 2011 and the economic recovery was stalling, the report observed. “With confidence falling, every effort must be made to avert recession,” said BCC’s chief economist David Kern.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.2101
GBP/US$ – 1.5478
GBP/CHF – 1.4675
GBP/CAN$ – 1.5773
GBP/AUS$ – 1.5017
GBP/ZAR – 12.5861
GBP/JPY – 118.74
GBP/HKD – 12.0005
GBP/NZD – 1.9508
GBP/SEK – 10.6642
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EUR: The single currency pared continued losses yesterday over better than expected French and German economic data, though the gains were marginal. The market was expecting strong policy statements from the summit meeting between Merkel and Sarkozy but was disappointed on that front. Not much activity on the economic front in Europe today except for Austrian bond auction scheduled later today. The GBP/EUR pair opens at 1.2114 this morning.
USD: Better than expected US consumer credit reading supported an improved risk appetite yesterday and the Sterling made some gains, though it remained range-bound in the 1.5420/1.5470 band. Not much economic data is expected today and the greenback is expected to trade flat. The GBP/USD pair opens at 1.5455 this morning.
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Have a great day!