Good morning and welcome to today’s foreign exchange market commentary on Tuesday the 29th of November.
Global equity markets broke the losing streak yesterday and made some smart recovery yesterday on speculations of new deal being prepared by European leaders. The EU finance ministers are due to meet today to discuss bailout plans that will prevent a contagion in the bond markets. Italy is expected to start bond auctions today at 10 am and the outcome at the finance ministers’ meet will decide the market’s appetite for Italian bonds. Rome may very well be forced to pay more than the unsustainable 7 per cent rate to raise up to €8 billion if the meeting fails to deliver something concrete. Germany and France are said to be finalizing a report on stronger fiscal union ahead of the key European summit scheduled for December 9 in Brussels.
Meanwhile, Poland has appealed to Germany for leadership in its hour of crisis. Though Poland is out of the common currency now and hopes to join it someday, the present crisis poses significant risk to the country’s stability and prosperity. The Polish foreign minister Radoslaw Sikorski said he’s scared of German inaction and the possible collapse of the eurozone poses the biggest threat to his country. Berlin has so far resisted the idea of both the Eurobond and the ECB printing money as the lender of last resort, saying the erring countries will have no incentive to reform their economies and excessive liquidity will create inflation problems.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1621
GBP/US$ – 1.5490
GBP/CHF – 1.4291
GBP/CAN$ – 1.6035
GBP/AUS$ – 1.5594
GBP/ZAR – 12.9468
GBP/JPY – 120.84
GBP/HKD – 12.0810
GBP/NZD – 2.0488
GBP/SEK – 10.7714
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EURO: The single currency recovered from its 7-week low against the greenback yesterday as fresh hopes of progress on the eurozone crisis amid rumours of an IMF package for Italy strengthened investors’ sentiments. The EUR/USD pair changed hands higher at 1.3307 yesterday despite ratings agency Moody’s warning that the present crisis endangers the ratings of all members in the bloc.
USD: The Sterling gained against the USD on improved risk appetite though retail sales data came worse than expected. Retail sales declined the most since mid-2009. The OECD report predicting UK recession next year didn’t help matters either. The report suggested Bank of England should increase asset sales to £400 billion to stave of the slowdown. The GBP/USD pair opens lower at 1.5520 this morning from Monday’s high of 1.5590.
Elsewhere, both the AUD and the NZD gained against the greenback yesterday. Ratings agency Fitch upgraded Australia to AAA from AA+, boosting the antipodean currencies further. Both the commodity currencies gained against the Sterling as well and gained about 2 per cent against the euro.
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Have a great day!