Good morning and welcome to today’s foreign exchange market commentary on Wednesday the 11th of January.
The market was relieved yesterday on at least one front – the French sovereign rating. After months of tensed anticipation, ratings agency Fitch announced France gets to keep its coveted status for now and will probably manage to keep it for the entire 2012. Fitch acknowledged that France remains vulnerable because of the ailing banking sector, and the additional European Financial Stability Facility commitment, but they remain manageable. President Sarkozy, who faces elections in April, should be a little relieved since borrowing costs are unlikely to hit the roof. French debt, however, remains 50 per cent more expensive than German Bunds, an indication of the market factoring in country’s weaknesses.
French economic data brought cheer to the market as manufacturing, particularly the food and mining sector, performed strongly. One swallow doesn’t make a summer, but amid all round gloom, the two EU heavyweights, France and Germany, can drive the region’s fight-back.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.2115
GBP/US$ – 1.5481
GBP/CHF – 1.4701
GBP/CAN$ – 1.5708
GBP/AUS$ – 1.5012
GBP/ZAR – 12.5259
GBP/JPY – 118.91
GBP/HKD – 12.0115
GBP/NZD – 1.9454
GBP/SEK – 10.6829
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EUR: The common currency remained firm against the USD for the second time on the trot. The EUR/USD pair remained range bound while the single currency managed to stay above the 1.2100 level. Rating’s agency Fitch’s confirmation of French AAA status boosted the euro further. Meanwhile, Italian PM Mario Monti warned that there can be ‘anti-Europe’ movement over continued inaction in the region. Many analysts are talking of an imminent Greek default and a subsequent departure from the EU as it transpired that the country will need a bigger bailout package than originally estimated. The GBP, on the contrary, is being increasingly seen as a safe haven currency as the UK economy is expected to record modest expansion in Q4, 2011. Whether the momentum is sustained will depend largely on BoE’s policies. The GBP/EUR pair opens at 1.2108 this morning.
USD: As risk sentiments improved globally and markets rallied, the greenback retreated against the major currencies yesterday. Though the Sterling had hit the 1.5500 level against the USD, it couldn’t sustain the momentum and ended up lower by the end of the day. There’s not much economic news coming out today. The GBP/USD pair opens at 1.5470 today morning.
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Have a great day!
