Good morning and welcome to today’s foreign exchange market commentary on Wednesday, the 1st of February.
Not sure if there’s a need to discuss Greek debts any further since the deadlock over the PSI negotiations continue. However, the rumour is that hedge fund managers have started stress-testing their portfolios to factor in a potential euro break-up scenario. Extreme scenarios ranging from a sudden 30 pc rise in gold prices to oil prices slumping by 45 pc to European stocks losing 50 pc has reportedly been considered. Though the break-up of the Euro will be an unprecedented event, managers are said to be digging out old computer models that were based on Deutschemark or the Drachma behaviour.
Meanwhile, data from the other side of the pond failed to live up to market expectations, since a raft of good numbers had come in over the past few weeks. The Case-Shiller survey, an influential barometer of housing market movement, showed prices falling in 18 out of 20 metropolitan areas in the US between Nov 2010 and Nov 2011. Consumer confidence also dipped, which was little unexpected. However, data from China provided some relief with manufacturing PMI number coming in above 50.0, showing acceleration in activities. Domestic demand seems to have offset the demand slump caused by the Euro.
A string of PMI numbers are expected from Europe and the UK today. The 0.2 pc contraction in Q4 GDP in 2011 was attributed to fall in manufacturing activity in the UK. Today’s data will indicate if a double dip recession, albeit a shallow one, is a reality. On the other hand a PMI number greater than 50 will surely provide some relief from the uncertainties.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.2032
GBP/US$ – 1.5728
GBP/CHF – 1.4501
GBP/CAN$ – 1.5772
GBP/AUS$ – 1.4827
GBP/ZAR – 12.2891
GBP/JPY – 119.89
GBP/HKD – 12.2031
GBP/NZD – 1.9084
GBP/SEK – 10.687
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EURO: The single currency continues to be bogged down by the protracted Greek negotiations. However, better than expected German and European unemployment data propped the euro though it failed to sustain the momentum. Ahead of Portugal’s debt auction, the common currency has slid today. The yield on Portuguese debts today will decide whether Lisbon will follow Athens in the coming days. The GBP/EUR pair opened at 1.2034 today morning while EUR/USD pair slid to 1.3111 this morning.
USD: Economic data coming out from both sides of the Atlantic failed to cheer the markets with the UK net consumer credit off-take hitting a record low in December. Similarly, US consumer confidence Index dipped in January despite dipping in December. The Sterling has managed to maintain most of yesterday’s gains against the Greenback and opens at 1.5775.
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Have a great day!
