Good morning and welcome to today\u2019s foreign exchange market commentary on Thursday the 24th of November.<\/p>\n
The eurozone dilemma drags on, as Germany decided to dig in its heels. As William Shakespeare had famously written \u201cTo be or not to be, that\u2019s the question\u201d seems Angela Markel\u2019s predicament now. Germany\u2019s 10-year notes remained unsold in its latest round of debt auction and Europe\u2019s largest economy managed to sell just 60 per cent of the debts on offer. Some analysts\u2019 said this is a clear sign that the market no longer considers Europe\u2019s strongest economy as infallible and expects more than the 2 per cent yield offered by Bundesbank. The yield on German bund rose to 2.206 on Thursday, while the yield on Italy and Spanish bonds declined.<\/p>\n
The pertinent question to ask is if Germany is unable to raise cheap money, what chance the much-talked about \u2018Eurobond\u2019 stands, since it will be underwritten by all the 17 member states, including the peripheral ones? Of course the spread between Germany\u2019s borrowing rate and say Italy\u2019s is wide and there\u2019s enough room for experimentation. But if Germany fails to get access to cheap funds, it will be difficult for it to support a bigger EFSF facility, though that front has remained quite for some time now, probably because Italy\u2019s debt of \u20ac1.9 trillion is too big even for a stronger EFSF. That leaves us with the option of changing the ECB\u2019s mandate and let it become the lender of last resort, like the Bank of England and the Federal Reserve.<\/p>\n
As European Commission President Jose Barroso makes the formal proposal for a common borrowing mechanism through the Eurobond, the proposed reforms of monitoring national budgets by the European Commission should be enacted sooner than later. That will go a long way in restoring investor confidence in the EU.<\/p>\n
GBP\/EURO \u2013 1.1602
\nGBP\/US$ \u2013 1.5556
\nGBP\/CHF \u2013 1.4254
\nGBP\/CAN$ – 1.6251
\nGBP\/AUS$ \u2013 1.5940
\nGBP\/ZAR \u2013 13.1824
\nGBP\/JPY \u2013 119.92
\nGBP\/HKD \u2013 12.1131
\nGBP\/NZD \u2013 2.0870
\nGBP\/SEK \u2013 10.7151<\/p>\n