Exchange Rates and Market Commentary [15/02/2012]

Exchange Rates and Market Commentary [15/02/2012]

Good morning and welcome to today’s foreign exchange market commentary on Wednesday, the 15th of February.

The Eurogroup ministers meeting scheduled to take place yesterday on the proposed rescue package has been postponed till Monday. The ministers called off the meeting accusing Athens of not meeting two vital conditions. First Greece is yet to articulate the measures for an additional €325 million in budget cuts. Also, the country in probability will witness a snap poll in April. EU leaders have demanded a written commitment from Greek leaders that all austerity measures promised to IMF and EU creditors will be duly honoured, irrespective of the electoral outcome.

However, global markets rose after China expressed willingness on Tuesday to buy European debts. Zhou Xiaochuan, the Chinese central bank governor repeated premier Wen Jiabao’s statement that China may increase euro denominated assets purchase to support the union. However, there was no clarification if Beijing will support the EFSF or the ESM, or rather buy debts from individual members. The possibility is that Beijing may buy securities through the IMF’s $1 trillion rescue package. That way, its holdings will be more secured and will give the country more voice in the global lending institution.

CURRENCY RATES OVERVIEW

GBP/EURO – 1.1936
GBP/US$ – 1.5721
GBP/CHF – 1.4414
GBP/CAN$ – 1.5648
GBP/AUS$ – 1.4636
GBP/ZAR – 12.0868
GBP/JPY – 123.36
GBP/HKD – 12.1874
GBP/NZD – 1.8762
GBP/SEK –  10.4795

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EURO: The dollar gained against the single currency yesterday as the Greek uncertainty continued to weigh down sentiments. The EUR/USD pair closed at 1.3080 yesterday after starting the day at 1.3210. However, the common currency gained traction after Chinese central bank governor Zhou Xiaochuan said China will increase EU debt purchase programme. Better than expected German and French GDP numbers supported the euro today. French economy showed a surprise +0.2 pc growth against expectations for -0.2 pc while German GDP contracted -0.2 pc vs. 0.3 pc. The Sterling has weakened against the euro on the back of heavy selling this morning. The GBP/EUR pair opens at 1.1915 this morning.

USD: The weak inflation numbers didn’t have much impact on the Sterling yesterday. CPI for January came in at 3.6 pc against December’s 4.2 pc. Cable however closed lower for the day as Greek uncertainties continued.  The GBP/USD pair fell to 1.5650 yesterday after US retail sales numbers came in lower than expected. The Pound has strengthened this morning ahead of Governor King’s speech. The BoE may go for another round of QE as inflation rate continues to moderate.

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Have a great day!

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