Good morning and welcome to today’s foreign exchange market commentary on Tuesday, the 28th of February.
There has been much speculation over the future of Greece (or rather the lack of it) in the eurozone with many remaining skeptical about Athens’ intentions after the elections get over in April. However, if the economic advisor to Greek Prime Minister Lucas Papademos Mr. Ghikas Hardouvelis is to be believed, Greece can’t imagine leaving the single currency bloc. The country would face unprecedented inflation, destruction of healthy businesses and massive wage cuts if it left the union,
Greek leaders wanted to rebuild the country not let it plundered, Hardouvelis was quoted saying in an interview on Sunday. His comments assume significance after German Inerior Minister Hans-Peter Friedrich had said on Saturday that Greece’s chance of regenerating its economy is much higher outside the bloc than within. It’s know fact that Chancellor Angela Merkel is against Greece leaving the EU.
Meanwhile the German economy continues to gain strength amid the debt crisis. A latest consumer confidence survey found households expected incomes to rise significantly in future. Market research firm GfK’s survey showed the index of household confidence barometer climbing marginally to 6.0 points in March from 5.9 points in February.
Given the two-speed economy being witness across Europe, the European Union summit scheduled this week in Brussels must focus on creating a genuine single market and initiating long-term structural reforms.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1803
GBP/US$ – 1.5857
GBP/CHF – 1.4225
GBP/CAN$ – 1.5795
GBP/AUS$ – 1.4727
GBP/ZAR – 11.9648
GBP/JPY – 127.91
GBP/HKD – 12.2985
GBP/NZD – 1.8874
GBP/SEK – 10.4365
EUR: The single currency weakened yesterday as worries over lack of consensus on increasing the firepower of the region’s bailout funds continued to weigh down sentiments. However, the euro showed resilience despite ratings agency S&P putting the EFSF on negative outlook and cutting Greece’s rating to “selective default” from the current CC as the country prepares for the massive bond swap programme. The GBP/USD pair tracked the EUR/USD movement yesterday and rallied to 1.1806 before markets closed. The focus remains on the second leg of the LTRO tomorrow and the euro is expected to remain well supported today. The GBP/EUR pair opens at 1.1792 this morning.
USD: Except the commodity dollars bloc, the greenback performed strongly against most of its peers yesterday. Despite the wider rally of riskier assets in the afternoon, the GBP/USD counter remained silent. Lack of any economic data ensured the cable followed risk sentiments yesterday, which dipped as worries over expanding the EFSF/ESM prevailed. Sentiments picked up during the US session as better than expected pending home sales numbers came in from the other side of the pond. There’s very little economic news on the home front with February CBI sales report due for release today. Durable goods numbers for January are expected in the US today. The GBP/USD pair opens at 1.5866 this morning.
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Have a great day ahead!
