Good morning and welcome to today’s foreign exchange market commentary on Monday the 13th of December.
As the dust starts to settle over the British position on EU ‘fiscal compact’, the question that’s on everybody’s mind is where does London go from here? David Cameron can of course make good of his threat: try stopping EZ countries from using the European Court of Justice and the European Commission to police their budget deficits on the ground that they belong to all 27 members. Whether this argument is legally tenable is open to debate, but it will certainly push Britain further from the remaining 26 members.
The question that needs to be asked however, remains was this necessary? The euro zone countries were not trying to impose the fiscal discipline laws on Britain. Britain was in-fact kept out of any proposed regulation. True France has not been very kind to City of London’s predominant position as a global financial centre, but then Britain has managed to gather enough support among allies to buttress its position. Unfortunately, that support may been lost forever, and President Sarkozy may succeed to push through proposals that disadvantages the UK. The formation of an inner caucus that imposes rules on the UK looms large now.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1821
GBP/US$ – 1.5596
GBP/CHF – 1.4618
GBP/CAN$ – 1.6007
GBP/AUS$ – 1.5438
GBP/ZAR – 12.8841
GBP/JPY – 121.42
GBP/HKD – 12.1389
GBP/NZD – 2.0364
GBP/SEK – 10.7260
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EUR: The euro lost ground against the Sterling and the greenback yesterday. Lack of any big-bang announcement to solve the present crisis has been cited for the common currencies continued under-performance. The EUR/USD pair fell 120 pips since yesterday’s closing as investors are left wondering about the next course of action. The pair opens at 1.3181 this morning. Cable has gained 130 pips against the euro and the GBP/EUR pair opens at 1.1823 this morning.
USD: The USD weakened against the Pound, but remains range bound. Heavy selling of the euro saw the Pound gaining ground and touching a high of 1.5650 against the greenback yesterday. UK house prices slowed down and demand picked up in November, boosting the GBP against the greenback further. The GBP/USD opens at 1.5576 this morning.
Elsewhere, the antipodean currencies firmed up against the USD yesterday. Domestic data showed Australian business conditions improve marginally in November as retail, mining and service sectors performed well for the month.
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Have a great day!