Good morning and welcome to today\u2019s foreign exchange market commentary on Friday the 13th of January.<\/p>\n
ECB president Mario Draghi must be a relieved man. Just when murmurs had started over the efficacy of ECB\u2019s strategy to lend cheaply to banks (LTRO) in order to bring down sovereign borrowing costs, Spain and Italy successfully raised \u20ac22 billion at a sharply reduced rate, thus proving Mr. Draghi right. Spain raised \u20ac10 billion yesterday by selling 3 and 4-year government securities, nearly twice as much than originally planned, that many claimed vindicates new PM Mariano Rajoy\u2019s austerity plans. However, security auction data \u2013 expected in the next couple of days, will tell us if the demand was due to the so-called \u2018Sarko trade\u2019 \u2013 where banks execute \u2018carry trades\u2019 (borrow cheap from ECB at 1 pc and lend higher to pocket the difference), or the ECB\u2019s bond buying program.<\/p>\n
Italian PM Mario Monti should take heart as well since the country managed to raise \u20ac12 billion at a yield of 2.735 pc, nearly half of last month\u2019s bond auction. This is Rome\u2019s lowest borrowing cost since March 2011. The country\u2019s stock market rose 2 pc while the single currency strengthened on the news. Buoyed by the success, Irish PM Enda Kenny announced his country may return to the bond market next year. Longer duration Italian debt will be on the block today and the auction result will decide the common currencies movement today.<\/p>\n
The Bank of England didn\u2019t spring any surprise and decided to continue with the 0.5 pc rate. There was no word on increasing the asset-purchase target from \u00a3225 billion either. So it was a pretty dull day yesterday. <\/p>\n
GBP\/EURO \u2013 1.1938
\nGBP\/US$ \u2013 1.5382
\nGBP\/CHF \u2013 1.4479
\nGBP\/CAN$ – 1.5639
\nGBP\/AUS$ \u2013 1.4844
\nGBP\/ZAR \u2013 12.3756
\nGBP\/JPY \u2013 117.88
\nGBP\/HKD \u2013 11.9349
\nGBP\/NZD \u2013 1.9362
\nGBP\/SEK \u2013 10.6232<\/p>\n