Exchange Rates and Market Commentary [02/12/2011]

Good morning and welcome to today’s foreign exchange market commentary on Friday the 2nd of December.

Yesterday’s main currency highlights include:

• GBP strengthening against USD following positive demand at the Spanish bond auction
• In fact, French, German, Spanish, Italian bonds all had a successful bond auction. Is confidence coming back to the region?
• GBP dropped off the pace slightly against the EUR due to poor manufacturing figures. It is now the second month in a row we see contraction
• GBP could though be set to rally against the EUR if we policymakers still fail to tackle head on the Eurozone crisis in an effective manner over the next few days
• Sterling also could continue to strengthen against the euro as investors are looking likely to continue to move funds into UK government bonds which remain AAA rated by the major agencies.
• US dollar slid against the EUR for the 4th day on the trot as risk appetite improves
• US data however has been better than expected this week, painting a rosier picture for US recovery
• Outlook for growth slashed following chancellor George Osborne Autumn statement
• Mervyn King wants UK commercial banks to strengthen their balance sheets
• Manufacturing figures in China fail to meet expectations, China posted a figure of 49.0 meaning their sector is in contraction and not growing

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CURRENCY RATES OVERVIEW

EURO/GBP 1.1641
US$/GBP 1.5696
CHF/GBP 1.4380
CAN$/GBP 1.5910
AUS$/GBP 1.5347
ZAR/GBP 12.6690
JPY/GBP 122.05
HKD/GBP 12.1980
NZD/GBP 2.0051
SEK/GBP 10.6059
AED/GBP 5.768
US$/EURO 1.3470

Today’s data focuses on the construction sector activity. This is expected to show a contraction.

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Have a great day.