EXCHANGE RATES AND DAILY MARKET COMMENTARY

Good morning. The eurozone debt crisis doesn’t show signs of receding, though the hairline of Greek bond investors are rumored to be receding rapidly. European Commission president Jose Manuel Barroso announced today that the commission will soon announce options on the introduction of Eurozone bonds, something Moody’s has already warned against, stating it will receive the weakest member-nation’s (read Greece’s rating).

Talking of ratings, French banks Credit Agricole SA and Societe Generale suffered downgrade today over their exposure to Greek debt. This is expected to erode investor confidence further and could drive the euro down. Moody’s however, left BNP Paribas untouched saying the bank’s capital base and profitability offers enough cushion against shock losses. An imminent Greek default may well turn out the modern era’s biggest tragedy!

CURRENCY RATE OVERVIEW

EURO/GBP – 1.1511
US$/GBP – 1.5729
CHF/GBP – 1.3861
CAN$/GBP – 1.5574
AUS$/GBP – 1.5355
ZAR/GBP – 11.593
JPY/GBP – 120.942
HKD/GBP – 12.281
NZD/GBP – 1.9172
SEK/GBP – 10.559
US$/EURO – 1.3662

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Euro:Sterling lost ground yesterday and was trading below 1.16. UK’s annual inflation was announced at 4.5% and can go up further before coming down in Q1, 2012. Money is getting cheap and the economy recovering on the back of strong exports is fading as UK’s trade deficit widen.

USD:The Sterling slipped to a seven-and-a-half month low against the USD.

The Italian bond auction didn’t do well on Tuesday with rumours of Chinese sovereign wealth fund buying Italian debts failing to cheer the market and yield on the country’s five year bonds were highest since Italy joined euro in 1999. There were rumours that Russia may intervene and buy European bonds, which seems plausible since Europe is Russia’s biggest energy market.

News to look out for today

• UK’s job numbers for the overall unemployment rate will be announced today. Analysts’ are hoping an unemployment rate of about 7.8 percent and benefits claims is expected to rise by 35,000 that will surely stretch public finances further. This may weaken Sterling.
• The eurozone industrial production figures are due today, a key indicator of manufacturing activity
• Elsewhere, U.S. producer prices and retail sales data for the quarter are due today.

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