Good morning and welcome to today\u2019s foreign exchange market commentary on Thursday the 8th of December.<\/p>\n
The rumour mills are working overtime, and new rumours are popping up before the old ones are quashed. There were talks that eurozone leaders have agreed to keep the current bailout fund \u2013 the European Financial Stability Facility, going alongside the newly proposed European Stability Mechanism \u2013 expected to start in early summer 2012. The combined firepower of the two funds was thought to be big enough to take care of the current debt crisis. However, German officials are said to be against any changes to how he funds will be used. Germany\u2019s tough stance sent the market in a spin, wiping off gains made by the common currency during the day.<\/p>\n
Last night\u2019s cracker was that the IMF may extend $600 billion in assistance to pay for the new fund. This was in addition that the IMF itself may have to raise money from contributing governments. However, the rumours were denied immediately. The situation was exacerbated further after Standard & Poor\u2019s downgraded several European banks including BNP, Barclays, Commerzbank, UniCredit, SocGen, Deutsche Bank, Rabobank, Intesa Saopaolo, Credit Agricole and Ulster. So ultimately it comes down to the ECB to announce some kind of rescue measure in tomorrow\u2019s meeting.<\/p>\n
The market is factoring in a 0.25% rate cut along with extra liquidity measures to help the banks stay funded. Though these measure will not take care the basic problems of the EU, i.e. \u2013 better fiscal discipline, it will certainly help the banks carry on with their businesses. Today morning\u2019s positive development was LCH Clearnet\u2019s announcement that it was cutting the margin requirement on trading Italian debts. This certainly indicates that some confidence over Italy\u2019s financial health is returning.<\/p>\n
GBP\/EURO \u2013 1.1701
\nGBP\/US$ \u2013 1.5698
\nGBP\/CHF \u2013 1.4493
\nGBP\/CAN$ – 1.5849
\nGBP\/AUS$ \u2013 1.5270
\nGBP\/ZAR \u2013 12.6355
\nGBP\/JPY \u2013 121.81
\nGBP\/HKD \u2013 12.6355
\nGBP\/NZD \u2013 2.0096
\nGBP\/SEK \u2013 10.5531<\/p>\n