Good morning and welcome to today\u2019s foreign exchange market commentary on Friday the 25th of November.<\/p>\n
Despite the US markets remaining shut on Thanksgiving Day, yesterday was still eventful. Two sovereign downgrades took place to begin with. Fitch lowered Portugal to \u2018junk\u2019 while Hungary was cut to BA1 after it approached the IMF last week seeking another bailout. In a strange reversal of fortunes, yield on UK\u2019s 10-year notes dropped below Germany for a few hours yesterday, coinciding Bank of England\u2019s next quantitative easing launch plan. The markets corrected the anomaly later, and those who had sleepless nights over German bonds remaining uncovered two days back can take heart as the bunds ended the day firmly. The Dutch \u2013 who have formed a European northern bloc along with the Germans and the Finns with stricter fiscal policies, said they will support any move to extend the ECB\u2019s mandate. This was definitely a positive development.<\/p>\n
Chancellor Markel however maintained her stated opposition against widening the ECB\u2019s role. Her resistance to the central bank becoming the lender of last resort is understandable. However, Germany\u2019s continued opposition to the proposal can very well put the euro\u2019s future at stake. After she reiterated her line in Strasbourg yesterday with Italian Prime Minister Mario Monti and French President Nicholas Sarkozy by her side, Italy\u2019s bond yields breached the unsustainable 7 per cent level again. <\/p>\n
At a press conference later, Monti said though he supported a stronger fiscal union for Europe, a Eurobond issue could contribute to the present crisis significantly. Sarkozy later clarified that he and Chancellor Markel will present a reforms package for the union at the upcoming Dec. 9 summit.<\/p>\n
GBP\/EURO \u2013 1.1622
\nGBP\/US$ \u2013 1.5553
\nGBP\/CAN$ – 1.6264
\nGBP\/AUS$ \u2013 1.5954
\nGBP\/ZAR \u2013 13.26
\nGBP\/JPY \u2013 120.04
\nGBP\/NZD \u2013 2.0906<\/p>\n