Exchange Rates and Market Commentary [01/12/2011]

Exchange Rates and Market Commentary [01/12/2011]

Good morning and welcome to today’s foreign exchange daily market commentary on Thursday the 1st of December.

The greenback plunged against major currencies yesterday after central banks across the globe took coordinated action to get money flowing in the system. In a synchronous move, the European Central Bank, The Bank of England, the Bank of Japan, the US Federal Reserve, the Bank of Canada and the Swiss National Bank lowered the existing US dollar liquidity swap arrangement rates by 50 basis points. The one-month cross currency swap rates of euros against the greenback had jumped three-year highs and yesterday’s move is expected to ease the euro.

Asian equity markets rallied on Wednesday despite China’s manufacturing sector reporting weakest numbers since 2009. The official Purchasing Managers’ Index (PMI) fell to 49 in November from 50.4 in October, suggesting manufacturing actually shrunk over slowing global demand. China announced lowering of reserve ratios for banks, a move that’ll free up money and enable the banks to lend more, thus stimulating credit off-take.

The UK PMI manufacturing data is expected today and analysts’ are predicting a reading of 47.4 – suggesting another month of contraction. BoE Governor Sir Mervyn King is due to present the twice-yearly Financial Policy Committee report today morning.


GBP/EURO – 1.1638
GBP/US$ – 1.5645
GBP/CHF – 1.4291
GBP/CAN$ – 1.5974
GBP/AUS$ – 1.5371
GBP/ZAR – 12.7861
GBP/JPY – 121.49
GBP/HKD – 12.1678
GBP/NZD – 2.0181
GBP/SEK – 10.6088

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EUR: The common currency surged against the greenback on the news of coordinated liquidity injection by central banks. There are speculations going on that firms are factoring in a possible euro break-up, though Goldman Sachs in a report said the Euro Zone may witness another recession, but the common currency will survive. The EU leaders have till December 9th Summit to deliver an effective and long-term solution to the present crisis. The Euro gained about 1 per cent against the greenback.

USD: Taking advantage of a cheaper US dollar, investors bought into commodity backed currencies with higher yields. The US pending home sales jumped by 10 per cent in October while the private sector added 206,000 jobs, much higher than analysts’ had predicted. Combined with last week’s strong retails sales numbers, it seems the US recovery is right back on track. The dollar index, which measures the USD against a basket of six other currencies, dropped to 78.345 from 78.990 the previous session.

Elsewhere, the Australian dollar and the South African Rand jumped 2 per cent against the USD as risk appetite grew.

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Have a great day!


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