Good morning and welcome to today’s foreign exchange market commentary on Monday, the 6th of February.
So the Greek negotiations continue to drag on. This can very well be taken as a precursor of things to come. As reported last week that hedge fund managers have started stress-testing their portfolios over a possible Greek exit from the EU and return to Drachma, that possibility is gaining traction. German Chancellor Merkel renewed her demand for deeper spending cuts before Athens receives the next round of bailout funding. Can’t really blame Ms Merkel. Berlin’s contribution has been the highest towards Athens in every bailout package that Greece has received. German voters have a reason to be upset.
Viewed from another angle, an Athens exit is probably the best option available. The €130 billion thus saved can be used to bailout other members. The list of recipients who may require Greece type bailouts is long really, but there chance of succeeding is much higher. Also, by exiting the EU, Greek politicians will be saved from taking deeply unpopular economic decisions and can conveniently pass the blame on Germany, France the troika of EC/ECB/IMF and the private sector lenders.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.2048
GBP/US$ – 1.5772
GBP/CHF – 1.4551
GBP/CAN$ – 1.5704
GBP/AUS$ – 1.4706
GBP/ZAR – 11.968
GBP/JPY – 120.83
GBP/HKD – 12.2310
GBP/NZD – 1.8988
GBP/SEK – 10.601
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EURO: The single currency gained on Friday after better than expected US NFP data came in. However, as the Greek PSI negotiations drag on, the euro pared some of its gains today. Reports suggest Greek PM Papademos has managed a general agreement on cutting wages and non-labour costs. His party leaders are scheduled to meet today to finalise the details of the proposed measures. The GBP/EUR pair opened higher today as the PSI deadlock continues.
USD: The US economy non-farm sector added 243,000 jobs versus an estimated 150,000. The strong job growth fuelled investor risk appetite and the GBP/USD pair hit a high of 1.5862 on Friday. Better than expected UK services PMI data supported the Sterling further on Friday. However, cable weakened this morning after one Euro-group finance minister announced that a Greek sovereign default cannot be ruled out. The GBP/EUR pair is expected to be range-bound today.
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Have a great day!
