Exchange Rates and Market Commentary [30/09/2011]

Exchange Rates and Market Commentary [30/09/2011]

Good morning. Yesterday it was Germany’s turn to vote for a bigger EFSF fund. The Bundestag voted 523 to 85 to approve the expansion of the European Financial Stability Facility (EFSF). Germany will now contribute €211 billion to the EFSF instead of €123 billion. However, German finance minister Wolfgang Schaeuble said he opposes the expansion of EFSF anytime soon. In the morning trade today, the common currency dropped against the USD over doubts of the firepower of the EFSF, leaving it on track for its biggest monthly fall in 10 months. Retail sales in Germany fell by 2.9% in August, driving the euro down further. Heavy selling by Japanese exporters pushed the euro close to a 10 year low against the Yen.

The Sterling gained 0.7% against the greenback yesterday on news that the Swiss National Bank will increase its Sterling reserve holdings. The pound however, lost ground against the Euro yesterday and ended the day 0.4% lower. Data out yesterday showed British home prices inching up 0.1%. Nationwide predicted stable house prices till the end of 2011.

Sentiment for the Euro still remains negative as many investors continue to bet on a Greek default. The next big challenge will be the EU trying to expand the size of EFSF to €2 trillion and ring-fence a potentially ‘managed’ Greek default.

Yesterday evening both Standard & Poor’s and Fitch cut New Zealand’s rating from AAA citing growing government and household debt. The budget deficit for the country also widened as the government went on a spending spree after the country was hit by a devastating earthquake.

The Eurozone “flash” September PMI is out today. The September Chicago PMI and US personal spending for August will indicate the US economy’s health in Q3, 2011.


GBP/EURO – 1.1504
GBP/US$ – 1.5546
GBP/CHF – 1.4038
GBP/CAN$ – 1.6202
GBP/AUS$ – 1.5982
GBP/ZAR – 12.4075
GBP/JPY – 119.21
GBP/HKD – 12.1138
GBP/NZD – 2.0332
GBP/SEK – 10.6732

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EURO: The pound fell by 0.4% against the euro yesterday. The EUR/USD pair opened at 1.3525 today morning. The GBP/EUR pair is hovering around 1.1523 level.

USD: The USD as safe haven is again in demand after New Zealand suffered ratings cut yesterday. Also consumer confidence data for the US came in better than expected. The GBP/USD pair starts its day at 1.5578 today.

Elsewhere, the AUD and the NZD tumbled over NZ’s debt rating cut. Also China’s PMI came lower than 50 for the third month in a row.

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