Exchange Rates and Market Commentary [12/01/2012]

Exchange Rates and Market Commentary [12/01/2012]

Good morning and welcome to today’s foreign exchange market commentary on Thursday the 12th of January.

The greenback gained lost ground on Wednesday as traders waited for ECB’s meeting scheduled on Thursday. The dollar hit a 16-month high against the single currency as further ratings cut of some EU member nations looks imminent. Also Germany’s GDP number for 2011 doesn’t look impressive and as growth was recorded at 3 pc against the estimated 3.7 pc. This is bad news for the entire eurozone because if Germany doesn’t grow, nobody else grows. However, German auction of 5-year notes were gobbled up by investors as the country sold securities worth €8.97 billion against the targeted €4 billion. The yield was less than 1 pc that shows investor confidence in the country’s strong fundamentals.

CURRENCY RATES OVERVIEW

GBP/EURO – 1.2031
GBP/US$ – 1.5306
GBP/CHF – 1.4588
GBP/CAN$ – 1.5584
GBP/AUS$ – 1.4859
GBP/ZAR – 12.3846
GBP/JPY – 117.64
GBP/HKD – 11.8809
GBP/NZD – 1.9249
GBP/SEK – 10.6192

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EUR: The common currency was hammered yesterday as ratings agency Fitch warned of a ‘cataclysmic’ effect if the ECB fails to intervene strongly. This pushed the euro below the 1.2700 level against the greenback. The Sterling however failed to capitalise on the single currency’s weakness and slid to 1.2050 level touching an intraday high of 1.2130. Lower than expected GDP numbers didn’t help the euro either as the country’s economy feared to be shrinking. ECB President Mario Draghi may announce further stimulus measures today as there’s not much scope to cut interest rates further. The GBP/EUR pair opens at 1.030 as eyes remain on today’s Spanish debt auction.

USD: The greenback gained against the major global currencies yesterday as the Fed’s Beige Book economic report nearly ruled out another round of liquidity infusion, indicating recovery of the world’s biggest economy. The cable started strong against the dollar, but lost ground after wider than expected UK trade deficit news came in. The Sterling eventually ended the day at 1.5309. UK industrial production data and US retail sales data is expected later today. The GBP/USD pair opens at 1.5290 this morning.

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Have a great day!

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