Good morning and welcome to today’s foreign exchange market commentary on Wednesday, the 22nd of February.
With the Greek deal settled for now, markets can start concentrating on other issues, especially the G20 meeting that is scheduled for later this week. Both the advanced and the developing economies will look for assurances that the EU will do everything within power to limit the effects of the ongoing crisis. Remember, the contagion effect still looms large and there are quite a handful of economies that may trip in near future. However, a general consensus, mind you not a concrete agreement which understandably will take time, could help officials inch closer to boosting the lending power of the International Monetary Fund for an effective safety net for future victims.
The Eurozone, as it has been mentioned numerous times in the past, has witnessed a two-speed economy. At one end of the spectrum there are stronger economies led by Germany that are highly competitive, while at the other end there are countries like Greece and the Irish Republic. Since all the 17 members use a common currency and there’s no way an individual member can peg the exchange rate against other currencies, Greece is left with the only option of what is known as the ‘internal devaluation’ of the currency to become more competitive. A reduction in wages should do the trick, as has been demanded by EU members for the public sector. Otherwise, another round of bailout for Greece may be required sooner than most of us would like to believe.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1914
GBP/US$ – 1.5770
GBP/CHF – 1.4387
GBP/CAN$ – 1.5721
GBP/AUS$ – 1.4795
GBP/ZAR – 12.1883
GBP/JPY – 126.431
GBP/HKD – 12.2298
GBP/NZD – 1.8930
GBP/SEK – 10.481
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EUR: The single currency didn’t quite outperform its global peers yesterday despite the agreement over the second round of bailout money. The EUR/USD pair failed the breach the Asian high of 1.3293, igniting speculations that the Greek development has already been priced in. However, the euro performed better against the Sterling and the GBP/EUR pair touched 1.1901 in intraday trading. This was surprising given January’s Public Sector Net Borrowing showed a greater-than-expected surplus. Today’s focus is expected to remain on European PMI numbers. The GBP/EUR pair opens at 1.1866.
USD: The dollar finished Tuesday marginally lower than its global peers. The euro changed hands for $1.3234 from $1.3244 on Monday evening. The dollar index, which measures the greenback against its six global peers, closed lower at 79.094 from 79.332 a day earlier. The GBP weakened against the dollar despite UK PSNB for January recording a higher surplus than anticipated. The cable shed 70 points today morning as the latest MPC minutes showed more members voted for further asset purchase than expected. The GBP/USD pair opens at 1.5700 this morning.
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Have a great day!
