Exchange Rates and Market Commentary [30/12/2011]

Exchange Rates and Market Commentary [30/12/2011]

Good morning and welcome to today’s foreign exchange market commentary on Friday the 30th of December, the last trading day of the year.

Italy’s debt auction yesterday was rather successful in that the country managed to keep the borrowing cost lower than the ‘unsustainable’ level of 7 per cent, though it could not raise the targeted €8.5 billion. The country can take heart that it augurs well for her in 2012. Mario Monti – Italy’s new technocratic unelected leader said the country is “back from the brink” but demanded a bigger European bail-out fund. Now that is bound to raise a few eyebrows.

Meanwhile, the Chinese economy is showing signs of a slow down as the HSBC PMI reading contracted for the second month in a row. The Purchasing Manager’s Index (PMI) for manufacturing activity was recorded at 48.7 in November, anything below 50 indicates contraction.

Housing is expected to remain weak generally in Britain as prices fell in December, according to Nationwide. However, post-Christmas retail sales were better than expected though margins got squeezed. Further rounds of quantitative easing might be required in 2012 to stop the economy from slipping into recession, while high inflation will continue to worry Bank of England’s Sir Mervyn King.


GBP/EURO – 1.1919
GBP/US$ – 1.5427
GBP/CHF – 1.4503
GBP/CAN$ – 1.5753
GBP/AUS$ – 1.5194
GBP/ZAR – 12.5323
GBP/JPY – 119.63
GBP/HKD – 11.9870
GBP/NZD – 1.9968
GBP/SEK – 10.6614

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EURO: Yesterday’s Italian debt auction data was supposed to decide the single currency’s price movement. The euro slipped against the greenback to 1.2860 yesterday after news of under-subscription of Italian debt hit the market. The country managed to raise a little over €7 billion against the targeted €8.5 billion at 6.979 per cent, a shade lower than the ‘unsustainable’ 7 per cent level. However, positive news from the other side of Atlantic has helped the Euro and the EUR/USD pair opens at 1.2915 this morning. No further economic data is expected from Europe and the session is expected to remain quiet today.

USD: The Sterling remained nearly flat against the greenback over the past 24 hours. A disappointing Italian bond auction and better than expected Chicago PMI and Pending Home Sales data didn’t help the cable either as it continued to trade below the 1.5500 level. However, the GBP/USD pair has recovered from yesterday’s low of 1.5370 and opens at 1.5415 this morning.

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Wish you a happy and prosperous new year!


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