Good morning and welcome to today’s foreign exchange market commentary on Tuesday, the 22th of May.
The head of the International Monetary Fund Ms Christine Lagarde has urged the UK government to take immediate measures to boost growth and cut unemployment warning a prolonged eurozone crisis would undermine UK’s growth seriously. The escalation of the crisis in EU could deliver a “substantial contractionary shock” to the UK, pushing back the progress made towards recovery.
The risks are large and tilted towards the downside”, the report observed, adding break up of the euro remains a real danger. The report, while lauding Chancellor George Osborne’s efforts to balance the books, noted the economy has remained flat due to defict reduction programmes. She urged the Bank of England to restart the monetary stimulus programme saying growth is too slow while unemployment, including youth unemployment, is too high. She said policies for sustained growth are needed before low or no growth become entrenched. However, UK’s policy response to the crisis has reinforced credibility at a time of greater global uncertainties, Ms Lagarde observed.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.2374
GBP/US$ – 1.5823
GBP/CHF – 1.4869
GBP/CAN$ – 1.6079
GBP/AUS$ – 1.5941
GBP/ZAR – 13.021
GBP/JPY – 125.73
GBP/HKD – 12.2810
GBP/NZD – 2.0651
GBP/SEK – 11.258
EUR: The single currency firmed up against the greenback and the Pound on Monday for the absence of any negative developments. Comment from the French President Francois Hollande about issuing joint euro bonds and hopes of an early agreement to contain the crisis helped soothe investor nerves. Due to the prevailing positive sentiments, the GBP/EUR pair hit a two-week low of 1.2349. Sentiments will drive the movement of the GBP/EUR pair today in the absence of important economic news from the EU region. GBP/EUR opens at 1.2364 this morning.
USD: The GBP/USD pair remained range-bound on Monday in the absence of any Tier 1 economic data, looking for directions from the wider market risk sentiments. The cable had slipped below the 1.5800 in early morning trading on pro-growth comments from Chinese premier Wen Jiabao and Europe didn’t throw up any major surprises. April CPI reading released in the UK today showed inflation dropping to two year lows. If the retail sales number comes weaker than expected tomorrow, the chatter for QE may grow louder. We have the existing home sales and Richmond Fed manufacturing index data due from the other side of the pond. The GBP/USD opens at 1.5805 today morning.
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Have a great day!
