Good morning and welcome to today’s foreign exchange market commentary on Monday, the 14th of May.
The new French President Francois Hollande has promised change to his countrymen, especially the younger generation who are yet to find jobs. The sad truth is Hollande’s promises regressive that vows to take the country in the opposite direction. His refusal to reign in the country’s enormously expensive welfare state sends the wrong signal to his countryman, that nothing can stop the French juggernaut carrying on as before.
The new socialist president has promised a balanced budget by 2017, but with a raft of spending promises that seems like a distant dream. It’s important to note that the country didn’t have had a balanced budget in the last 40 years. France already is one of the highly taxed countrirs and it’s unlikely that the cost of the public sector would be entirely borne by today’s tax payers. Taxing the super-rich at 75 percent will raise very little revenue for Paris, but may give an unexpected boost to George Osborne in London as the rich moves out. Left with the Hobson’s choice, Hollande will borrow heavily so that the debt is pushed back to the next generation or two, only to be repaid by the same youngsters who are celebrating his victory today. The dewy-eyed teenagers who cheered for Hollande proves that there are still places on earth where turkey’s welcome Christmas.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.2465
GBP/US$ – 1.6079
GBP/CHF – 1.4982
GBP/CAN$ – 1.6094
GBP/AUS$ – 1.6054
GBP/ZAR – 13.1121
GBP/JPY – 128.69
GBP/HKD – 12.4832
GBP/NZD – 2.0581
GBP/SEK – 11.202
EUR: The euro continued to suffer on Friday as Greece prepares for another round of voting that probably will give the leftists a thumping majority. Sterling eased a little against the single currency on Friday as investors booked profits hoping a solution on the Greek deadlock by Monday, when the Greek President reconvenes a meeting of the political parties. France, Spain and Italy are due to auction bonds today and if yields surge, the single currency may witness further downside. The GBP/EUR pair opens at 1.2485 this morning.
USD: A number of factors including weak Chinese economic data, the political circus in Greece and banking giant JP Morgan Chase’s shock loss of $2 billion drove the cable down against the greenback, as risk investors’ risk appetite diminished. The reading of the University of Michigan consumer confidence index came in at its highest level since Jan 2008, showing consumer sentiments are improving in the world’s largest economy. However, with the dark Greek cloud hanging over the global economy, this news had little effect on the markets. The Bank of England’s May inflation is due this week and any hint of a higher reading will push the pounds up. The US FOMC meeting is due from the other side of the pond though European troubles are expected to dominate world headlines this week.
