Good morning. There’s a lot at stake today. Or apparently that’s what the market buzz is. Some say it’s the moment of truth of Europe. Today the European Union will meet its destiny, something that it has been trying to avoid for sometime now. The British PM has cancelled his scheduled visit to Japan and New Zealand to participate in the long discussions to be held in Brussels. There have been some contradictions the way developments have taken place in the last 24 hours. The EU leaders have spoken about inviting the top emerging countries to buy European bonds. China has been urging the EU leaders to get their house in order and has apparently pledged to support the European bailout fund – the EFSF, through the International Monetary Fund (IMF), though no specifics have emerged till date. There has been no commitment from the Chinese officials on this issue either. Hope the Chinese are not indulging in kite flying (They make nice kites, by the way).
Brazil has been forthright in rejecting the idea of buying European bonds. “I believe that European countries do not need funds from Brazil to buy bonds. Brazil is not considering it. They have to find solutions to the European problems within Europe,” said Brazilian Finance Minister Guido Mantega to reporters in Brasilia. No beating around the bush there. So one more down on that front!
Russia has spoken about supporting the Euro, but no official clarification has emerged from Moscow. The country holds substantial forex reserve and the EU remains its biggest energy buyer. But that doesn’t guarantee its participation in EU bond auctions. So overall, not a rosy picture at all.
The only silver lining has been Chancellor Angela Markel’s near certainty of winning the German lawmakers’ backing for beefing up the EFSF fund. In the Bundestag lower house of parliament, all parliamentary groupings except the Linke far left have supported bolstering the EFSF fund, without Germany putting more money in.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1501
GBP/US$ – 1.6019
GBP/CHF – 1.4048
GBP/CAN$ – 1.6230
GBP/AUS$ – 1.5431
GBP/ZAR – 12.6858
GBP/JPY – 121.73
GBP/HKD – 12.4598
GBP/NZD – 2.0080
GBP/SEK – 10.4914
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EURO: The common currency continued to trade in a narrow range of 1.3880 and 1.3960 against the greenback yesterday. Germany’s reluctance in accepting France’s proposal of ECB backing the EFSF still remains. There’s also disagreement over the ‘haircut’ on Greek debts. Hopefully, there will be some consensus on these issues today. The GBP/EUR pair remained flat yesterday and opens at 1.1485 today morning.
USD: The GBP/USD pair also remained range-bound in the last 24 hours and opened at 1.6019 today morning. The US Durable Goods Order and New Home Sales are expected in the afternoon today, while the CBI Industrial Order Expectations in the UK is due for release today.
Elsewhere, The AUD and the NZD weakened against the greenback yesterday. Surprisingly the Vatican commented on the credit crisis urging sweeping reforms of the financial sector globally.
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Have a great day!