Exchange Rates and Market Commentary [11/10/2011]

Exchange Rates and Market Commentary [11/10/2011]

Good morning. The euro managed to continue its upward journey yesterday with the markets believing that Angela Merkel and Nicholas Sarkozy’s secret pact would be able to help arrest Europe from sliding back in turmoil. After the credit crisis of 2008, politicians had vowed not save any banks in the future. However, Belgium and France’s latest move to save Dexia bank from collapsing shows nothing lasts for ever. Greece’s next bailout tranche has apparently hit a road block with Slovakia’s opposition not in favour of writing further checks to Greece. Not without a reason though. The relatively poor state with a population of 5.5 million is expected to contribute guarantees worth £6 billion to the European Financial Stability Facility (EFSF) fund. Now that sounds a little unreasonable for the tiny state.

Nonetheless, any further delay of the EFSF ratification, originally scheduled in mid-October may send the markets in a tailspin. The common currency managed to gain 2% against the greenback on Monday with similar gains against the Cable. Risk was back as Standard and Poor’s reaffirmed France’s AAA rating with a stable outlook. Also the troika of IMF/ECB/EU announced that they would complete the Greek bailout talks soon. These gave some respite to the common currency as selling pressures eased.


GBP/EURO – 1.1454
GBP/US$ – 1.5635
GBP/CHF – 1.4144
GBP/CAN$ – 1.6126
GBP/AUS$ – 1.5841
GBP/ZAR – 12.3352
GBP/JPY – 119.98
GBP/HKD – 12.1740
GBP/NZD – 2.0002
GBP/SEK – 10.4345

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EURO: Strong demand for the common currency drove the EUR/USD pair to a high of 1.3698 yesterday amid hopes of the region’s banks being recapitalized and Greece avoiding a default. The euro also got a boost over rumours of Russia talking to Spain over buying Spanish bonds. The GBP/EUR also rallied to reach an intraday high of 1.1453 in the late afternoon. The GBP/EUR pair opens at 1.1470 in morning trade today.

USD: The USD weakened yesterday as risk was back on the horizon. The EUR/USD touched 1.3698 over strong demand for euro. The GBP/USD pair however, didn’t show much movement over MC member Andrew Weale’s announcement of further QEs in the future. The modest 0.3% gain of retail sales, as per BRC figures, didn’t help the Cable either. The GBP/USD opens at 1.5645.

Elsewhere, both the AUD and NZD made strong comebacks against the USD yesterday. The Japanese government also may intervene to halt a steady appreciation of the JPY.


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