Good morning and welcome to today’s foreign exchange market commentary on Monday, the 20th of February.
That makes it the third Monday in a row and we are yet to witness a resolution to the ongoing deadlock. The stakes are high today, as they have been for the last three weeks, since European Finance Ministers are supposed to discuss if Greece qualifies for a second round of bailout funding worth €130 billion. Prime Minister Lucas Papdemos is expected to attend the meeting along with his Finance Minister, showing the gravity of the situation. Senior officials from Athens justified Papademos’ presence saying developments at the meeting may warrant decisive action.
Some of the members of the so-called 17-member Eurogroup, especially those with the strongest economies in the EU region, including Germany, Finland, Austria and the Netherlands, are pressing for stricter supervision of government spending and continuation of austerity measures after the general elections, likely to be held in spring, are over.
Fortunately for Athens, another barrier to the bailout money disappeared over the weekend when private lenders led by banks and hedge fund managers agreed to accept losses up-to 70 percent on Greek bonds. This should come as a big relief for Greece though the agreement is yet to be signed off by the Eurogroup.
Back home, UK retail sales for January came as a pleasant surprise on Friday as data released by the Office for National Statistics showed a 0.9 percent growth in sales volume. A sustained growth may convince the BoE to hold back its quantitative easing programme beyond May.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.2015
GBP/US$ – 1.5850
GBP/CHF – 1.4520
GBP/CAN$ – 1.5754
GBP/AUS$ – 1.4742
GBP/ZAR – 12.2028
GBP/JPY – 125.810
GBP/HKD – 12.2896
GBP/NZD – 1.8920
GBP/SEK – 10.625
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EUR: The single currency performed well against the greenback on Friday over talks of an imminent Greek settlement. However, the EUR/USD pair failed to break the crucial 1.32 level as weekend profit booking took hold. The better-than-expected UK retails sales data pushed the GBP/EUR pair to an intraday high of 1.2060 on Friday. The level however, couldn’t be sustained and the pair closed at 1.20. The common currency opens higher today amid talks of an impending Greek settlement and the Chinese central bank lowering reserve ratio for banks to stimulate lending. GBP/EUR pair opens at 1.2017 this morning.
USD: The greenback had a mixed day on Friday with the commodity currency-block losing ground against the USD while most of its peer from Europe strengthened. The dollar index, indicator of the greenback’s strength against a basket of six global currencies, remained unchanged for the day. The Sterling performed particularly well on the back of strong UK retail sales data and hit a intraday high of 1.5862 before retracing some of its gains on profit booking. No economic data is expected from the other side of the pond as it’s a public holiday in the US today. The GBP/USD pair opens at 1.5850 this morning.
Have a great day!
