Good morning and welcome to today’s foreign exchange market commentary on Thursday the 14th of December.
The ongoing EU crisis and the lack of clarity at policy level continue to weigh global markets down. To add to the euro zone’s woes, consultancy Ernst & Young have predicted a double-dip recession for the region in 2012. The economies of the 17 member countries may actually shrink in the first six months of 2012 while unemployment is likely to remain over 10 per cent till 2015. The region may witness only 0.1 per cent growth for the whole of 2012, it warned. The fiscal consolidation measures announced last Friday in Brussels are a step in the right direction, the report observed, noting speedy implementation remains a challenge.
Meanwhile, credit ratings agencies are on a overdrive and a handful of French banks were at the receiving end of Fitch yesterday. Standard & Poor’s may go ahead and downgrade French sovereign AAA rating by Friday afternoon. Last heard, French Foreign Minister Alain Juppe was trying to convince markets that a ratings downgrade doesn’t mean much – something known as ‘setting the expectations right’.
On the other hand unemployment continues to bog the UK down though people claiming unemployment benefits actually came much lower than expected. The rise in claims was only 3,000 against an expectation of 13,700.
Italian debt auction of €5 billion yesterday was successful though yield rose to 6.47 per cent. This is higher than 6.29 per cent that the country paid a month ago. The country needs to implement fiscal deficits down fast to convince markets that it is capable of servicing debts in the long-term. Paying more than 6 per cent for five year notes may prove catastrophic if it is unable to kick-start the economy.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1874
GBP/US$ – 1.5475
GBP/CHF – 1.4675
GBP/CAN$ – 1.6041
GBP/AUS$ – 1.5603
GBP/ZAR – 12.9498
GBP/JPY – 120.6
GBP/HKD – 12.0418
GBP/NZD – 2.0628
GBP/SEK – 10.7992
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EURO: The single currency continued its downward journey against the greenback though it managed to stay put against the Sterling. The downgrade of Five European banks by Fitch – including French Credit Agricole didn’t help the single currency either. The fear of a French downgrade looms large on the euro. The EUR/USD pair witnessed an intraday low of 1.2950 and opens at 1.2970 this morning. The GBP/EUR pair touched a high of 1.1940 yesterday and opens at 1.1920 this morning.
USD: As investors seek to park assets in safe haven currencies, the greenback continues to gain against major currencies across the board. The GBP/USD pair touched a low of 1.5420 yesterday only to recover marginally in the last 24 hours. The pair opens at 1.5494 this morning.
Elsewhere, the Swiss National Bank vowed to keep the CHF at 1.20 against the Euro in an attempt to arrest the rapid appreciation of the Franc against the euro. The antipodean currencies reversed their gains for the week as risk is currently off the table for investors.
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Have a great day!
