Good morning and welcome to today’s foreign exchange market commentary on Monday the 19th of December.
We start the week on a positive note. The reason? Well, the much anticipated ratings downgrade of France didn’t take place on Friday. Rather Fitch chose to spare France with a negative outlook rating only. That must have been a big relief for president Sarkozy. It remains to be seen however, whether the other two agencies – Standard and Poor’s and Moody’s, also follow suit or actually downgrades France by one notch. The other development for today is the news of North Korean dictator Kim Jong Il’s demise. Though the country stands isolated and doesn’t influence the global economy much, it’s history of launching sudden unprovoked attacks on South Korea does rattle the markets.
Coming back to Friday’s developments, there were rumours of Italy and Spain being downgraded after the close of the European session. However, it was actually Belgium that bore the brunt and was lowered by two notches by Moody’s. The ratings agency cited rising borrowing costs and the enormous liability due to the failure of Dexia bank.
Fitch, on the other hand, placed Spain, Ireland, Belgium, Italy, Slovenia and Cyprus on a negative watch list for a possible downgrade next month. Chances of a resolution to the region’s debt crisis are technically and politically beyond reach, the agency warned.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1910
GBP/US$ – 1.5526
GBP/CHF – 1.4536
GBP/CAN$ – 1.6092
GBP/AUS$ – 1.5594
GBP/ZAR – 12.9528
GBP/JPY – 120.85
GBP/HKD – 12.0769
GBP/NZD – 2.0390
GBP/SEK – 10.7435
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Euro: The single currency’s losses were minimal on Friday and the euro managed to stay above the 1.3000 level against the greenback while pushing the cable below 1.1900 level during the day’s trade. France is scheduled to auction securities worth €7 billion today while Spain will sell assets tomorrow. EUR/USD opens this morning at 1.3021 as news of Kim Jong Il’s death and a possible EU downgrade spooks the markets. The GBP/EUR opens at 1.1901 today morning.
USD: There were no economic data on Friday from the domestic market. Consumer price data for the month of November was released on the other side of the Atlantic and the 12-month reading for the US fell for the second straight month. This helped cable gain some ground and it touched 1.5550 against the greenback. However, the news of an imminent EU downgrade keeps investors on their toes and the GBP/USD pair opens at 1.5500 this morning.
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Have a great day!
