Good morning and welcome to today\u2019s foreign exchange market commentary on Monday the 18th of January.<\/p>\n
All\u2019s not lost for the euro, not at least in the near term. Despite the EU region\u2019s lifeboat fund suffering a downgrade from Standard & Poor\u2019s, the EFSF managed to sell six-month maturity bills at a yield of 0.2664 pc, which is slightly higher than the previous auction. People who had written the obituary of the single currency may have to wait a little longer, or may be forever. The recent move by the European Central Bank (ECB) to pump-in half-a-trillion Euros worth liquidity (the LTRO) in the region\u2019s banks certainly indicates that the central bank is not going to give up without a fight. Nor the region\u2019s political leaders will surrender meekly to the crisis. The recent depreciation of the common currency has a potential upside; it makes exports cheaper and hence, more competitive. This is expected to benefit all the countries in the region to a varied degree, but the biggest beneficiaries will be the net exporters like Germany. <\/p>\n
The common currency however, made a strong recovery yesterday after the German ZEW consumer confidence numbers came in. The reading jumped from -53.8 to -21.6, the biggest leap in history. Agreed it is still in the negative territory, but it won\u2019t be long before Germany again starts firing on all cylinders. A biggest turning point in the crisis could be the agreement of greater fiscal union among member states. An agreement to that effect is expected by March.<\/p>\n
Another interesting event to look out for is the Portuguese short-term debt auction today. S&P had cut the country\u2019s debt to junk on Friday. The probability of default by Portugal has been estimated at 65 pc over the next five years, an extension of the contagion theory based on the Greek default probability.<\/p>\n
Back home, the unemployment data for December is due today. CPI data released yesterday showed a slight moderation; headline inflation dropped to 4.2 pc from 4.8 in November. This is indeed good news, and if the economy shows signs of a slowdown, some skeptics are already saying UK is witnessing a double-dip recession, the BoE Governor can initiate another round of quantitative easing without worrying too much.<\/p>\n
GBP\/EURO \u2013 1.2032
\nGBP\/US$ \u2013 1.5356
\nGBP\/CHF \u2013 1.4551
\nGBP\/CAN$ – 1.5591
\nGBP\/AUS$ \u2013 1.4791
\nGBP\/ZAR \u2013 12.3096
\nGBP\/JPY \u2013 117.72
\nGBP\/HKD \u2013 11.9142
\nGBP\/NZD \u2013 1.9130
\nGBP\/SEK \u2013 10.6031<\/p>\n