:: United States Dollar: The dollar strengthening theme continues on the back of persistent risk aversion and fears of a pending financial crisis in the Eurozone. Yesterday was Thanksgiving in the US and as a result markets were relatively calm. In the UK concerns over the impartiality of the MPC have been raised after a public spat between Governor Mervyn King and external member Adam Posen. Posen had publicly mentioned that the language in the most recent inflation report was overly political, highlighting the mention in the report of an upcoming fiscal review. GBP/USD sold off slightly yesterday, hitting a low of 1.5725 before recovering to levels around 1.5750. This morning cable dropped beyond 1.5700 but opens slightly higher at 1.5715. All quiet on the data front today.
– We expect a range today in the GBP/USD rate of 1.5650 to 1.5800
:: Euro: Having been very much involved in the financial fracas over the past 12 months, Germany is finally starting to feel the effects of contagion, in the form of widening CDS spreads (a form of insurance on government bonds). Talk that the Financial Stability Fund may need topping up have worried investors and have called into question the creditworthiness of the German government, who have so far been called upon to provide funds for emergency bailout packages. Wolfgang Schauble, the German finance minister, did little to calm fears, stating that Germany is “…not swimming in money, we’re drowning in debts”. EUR/USD fell from a high of 1.3380 yesterday to levels around 1.3245 where we open this morning.
– We expect a range today in the GBP/EUR rate of 1.1800 to 1.1900
:: Aussie and Kiwi Dollars: “The antipodeans remain under pressure as a result of ongoing sovereign worries in the EU. Comments from RBA Governor Stevens also exerted downward pressure on the Australian dollar, which fell from 0.9830 to levels below 0.9680 this morning. Stevens stated that Australia’s interest rate is appropriate for the period ahead, dampening expectations for further rises in the overnight early next year. The Kiwi also fell from levels around 0.7625 to a low of 0.7545 this morning, making it the third-worst performer against the greenback this week. ”
– We expect a range today in the GBP/AUD rate of 1.6100 to 1.6300
– We expect a range today in the GBP/NZD rate of 2.0700 to 2.0900
