Good morning and welcome to today\u2019s foreign exchange market commentary on Monday the 16th of January.<\/p>\n
What the market has been anticipating for long finally took place on Friday as Standard and Poor\u2019s downgraded France. The yield on French bonds didn\u2019t shoot neither did there was much movement in CDS rates. The conclusion: the market had already factored in the event. However, the casualty of the latest round of downgrade may be the European lifeboat fund \u2013 the EFSF. S&P had already warned in December that any downgrade of the AAA EU members may result in the European Financial Stability Facility going down a few notches from the current \u2018negative\u2019 outlook. <\/p>\n
The biggest news on Friday however, was not the downgrade of France (or Italy, Spain and Austria). But the breakdown of talks between Greece and the private investors over the amount of haircut was the biggest talking point on Friday. Talks with banks are expected to resume on Wednesday and failure to find a solution could lead to a disorderly default in March when the payments become due.<\/p>\n
Meanwhile ECB Governing Council member Ewald Nowotny said on Sunday that the European Central Bank will do all it can to calm investor sentiments after the S&P downgrade. He advocated for a safety net for the region\u2019s struggling members. He said S&P has certain misgivings about how Europe is tackling the debt crisis. The basic difference is that while the US Fed had intervened aggressively with liquidity measures, the EU is advancing via the fiscal consolidation path with restricted intervention by the ECB. This probably explains why the UK has managed to keep its top rating despite having high debts, he added. <\/p>\n
GBP\/EURO \u2013 1.2064
\nGBP\/US$ \u2013 1.5294
\nGBP\/CHF \u2013 1.4592
\nGBP\/CAN$ – 1.5604
\nGBP\/AUS$ \u2013 1.4831
\nGBP\/ZAR \u2013 12.4454
\nGBP\/JPY \u2013 117.52
\nGBP\/HKD \u2013 11.8891
\nGBP\/NZD \u2013 1.9268
\nGBP\/SEK \u2013 10.7076<\/p>\n