Good morning and welcome to today\u2019s foreign exchange market commentary on Friday the 18th of November. <\/p>\n
Contagion fear continues to haunt Europe driving down the common currency down ever. The call for ECB\u2019s intervention is getting louder with the US and France urging feverishly the independent central bank to become the \u2018Lender of last resort\u2019 and turn the cash printing machine on. The debt crisis that started with the peripheral states like Greece, Ireland and Portugal, have now started affecting the core states like Italy, Spain and France. <\/p>\n
On its part the ECB has been reluctant to lend directly to the governments since it flouts the Lisbon Treaty and can undermine its independence from political interference. Needless to say that it\u2019s also worried about easy money stoking inflation. Hence it has stuck to its position that the governments need to sort out the problems themselves rather than depending on bail-outs.<\/p>\n
However, the ECB has chosen to overlook three important benefits that a fresh quantitative easing will bring. It will ease the near dried-up money markets since there\u2019s barely any liquidity in the system; stave off a looming double-dip recession that looks more real with each passing day, and prevent the real possibility of Spain and Italy being shut out from the bond markets. The suggested solution of turning EFSF into a bank that can borrow from ECB and to lend the region\u2019s governments to keep their borrowing costs under control needs to acted upon, and quickly. This is a viable solution since ECB is forbidden from lending governments directly, but there\u2019s no bar on lending via the EFSF. However, there are no two ways that countries with loose monetary policy like Italy and Greece must enforce strict fiscal disciplines as a pre-condition to their continued EU membership, a long-time legitimate demand made by Germany. As they say, \u2018desperate times require desperate measures.\u2019<\/p>\n
GBP\/EURO \u2013 1.1697M
\nGBP\/US$ \u2013 1.5767M
\nGBP\/CHF \u2013 1.4492M
\nGBP\/CAN$ – 1.6248M
\nGBP\/AUS$ \u2013 1.5830M
\nGBP\/ZAR \u2013 12.9680M
\nGBP\/JPY \u2013 121.21M
\nGBP\/HKD \u2013 12.2906M
\nGBP\/NZD \u2013 2.0767M
\nGBP\/SEK \u2013 10.7210M<\/p>\n