Exchange Rates and Market Commentary [28/10/2011]

Exchange Rates and Market Commentary [28/10/2011]

Good morning. Yesterday’s euro deal boosted market sentiments globally. Equity markets around the world gained while major currencies gained against the greenback as risk appetite improved. More positive news came from the other side of the Atlantic. US GDP for the third quarter grew at a faster 2.5% annualised rate, while personal consumption jumped 2.4% in Q3 compared with only 0.7% in Q2. The trend should get stronger as the festive season draws closer.

Bond yields across the Europe dropped yesterday, in line with the positive sentiments after yesterday’s deal. Italian bonds yield had dropped in the morning, only to rise again in the afternoon. The reason cited was the lack of new austerity measures to cut the budget deficit and the ongoing political instability under the stewardship of colourful Berlusconi. This is important since Italy is slated to raise about €7.25 billion through auctions of different maturity bonds. If the 10 year maturity securities clip the 6% mark, then the Euro rally may come to an end. On a positive note, there has been some clarity over China’s participation in the EFSF fund expansion. Unidentified Chinese officials, close to the communist regime said China may end up buying European bonds worth $100 billion. However, state Xinhua news agency said the EU should find its way out of the crisis rather than depending upon “good Samaritan” for bailout packages.


GBP/EURO – 1.1356
GBP/US$ – 1.6054
GBP/CHF – 1.3887
GBP/CAN$ – 1.5961
GBP/AUS$ – 1.5072
GBP/ZAR – 12.4542
GBP/JPY – 121.95
GBP/HKD – 12.4958
GBP/NZD – 1.9656
GBP/SEK – 10.2248

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EURO: The EUR/USD rallied yesterday breaking through the 1.4200 level to touch a high of 1.4250. Meanwhile, the head of EFSF is in China looking for commitment from the communist regime for help. China’s vice finance minister said he was happy that the EU has reached a consensus, but failed to make any commitment over Chinese participation. The EU region is China’s single biggest export market and it’ll be in China’s self-interest to participate in the EFSF expansion. The common currency gained against the Sterling yesterday and the EUR/GBP pair touched 0.8830 yesterday evening.

USD: Yesterday’s EU deal boosted sentiments across the Atlantic where the S&P 500 and Dow gained 3.43% and 2.86% respectively. Cable gained against the greenback as well to touch a high of 1.6140 yesterday afternoon. The GBP/USD pair is trading around 1.6090 level.

Elsewhere, both the AUD and the NZD gained sharply against the greenback after yesterday’s EU development. The central bank governor’s announcement of a possible rate-hike pushed the NZD further up against the major world currencies.

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Have a great day!


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