Good morning and welcome to today’s foreign exchange market commentary on Friday the 20th of January.
The single currency gained against global currencies yesterday after Spain and France debt sales went off well. The euro is now 2.5 pc higher than the dollar and has hit a 3-week high against the Sterling. Strange development since it was battered last week over the impending French sovereign downgrade.
Yesterday France sold bills worth €7.97 billion with two and four-year maturity at an average yield of 1.05 pc, more than 50 bps lower than its last auction in October despite losing its AAA rating in last week. Spain managed to raise €6.6 billion in four, six and ten year bills against an initial target of €4.5 billion.
Meanwhile, a leaked draft report of the World Economic Outlook by the International Monetary Fund shows the fund has revised its global GDP growth target to 3.3 pc for 2012 from the previous 4 pc. Growth targets for an arc of countries in Southern Europe have been drastically slashed. The ongoing austerity measures will bite Italy and Spain hard with their economies shrinking by 2.2 pc and 1.7 pc respectively. The Greek negotiations over a €100-billion bond swap are continuing with some resolution expected today. If Greek Prime Minister Lucas Papaemos manages to convince the
International Institute of Finance, a global group of around 450 financial institutions to accept at least a 50 pc haircut, it would slash Greek debts by €100 billion and unlock new EU rescue packages.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1967
GBP/US$ – 1.5491
GBP/CAN$ – 1.5706
GBP/AUS$ – 1.4881
GBP/ZAR – 12.35
GBP/JPY – 119.59
GBP/NZD – 1.9330
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EUR: As news of ‘progress’ in talks between Greece and its bondholders came in, the common currency hit an intraday high of 1.2972 against the greenback yesterday. The euro also strengthened over news of strong demand for French and Spanish debts. The Sterling also slipped against the single currency to touch 1.1950. The market is expecting the so-called Greek PSI (private sector initiative) talks to conclude successfully which is expected to keep the euro well supported. The GBP/EUR pair opens at 1.1960 today morning.
USD: The greenback lost ground against most of its major counterparts over improving risk sentiments. The dollar index which measures the greenback against a basket of six major currencies slid to 80.198 from 80.540 the previous evening. The Sterling also touched an intraday high of 1.5488 against the dollar yesterday while UK December retail sales number will decide its fate today. The
GBP/USD opens at 1.5498 today morning.
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Have a great weekend!
