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Friday, 16 December 2011

Currency Exchange News Slows Down as Christmas Approaches

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With markets approaching the Christmas closedown and no fresh concerns for the Eurozone debt crisis (but also no meaningful progress) currency rates seem to be settling down for the festivities. The Pound is resting at 1.191 against the Euro and it looks set to stay at that rate unless Standard & Poor, Moody’s or Fitch announces a large European Sovereign credit downgrade earlier than expected. Recent UK economic data had little market impact; retail sales fell 0.4% in November – more than expected – and consumer spending has been reportedly weak in the build up to Christmas. The failed EU Summit is still the headline that investors cannot see past, and as a result periphery economic statistics are proving to have little impact on the GBP/EUR rate.

An odd comment from France’s Central Bank governor Christian Noyer, that rating agencies: “should begin by downgrading the United Kingdom,” has been ignored on the large part by investors, however it will be remembered by British politicians and could heighten the already tenuous relationship between the UK and the Eurozone.

Whilst the Eurozone is facing torrid times, the alarming rate at which the Euro has lost value against the Dollar and the Yen has paved the way for foreign buyers to embark on acquisitions of European corporations. The Dollar has grown around 13% against the Euro since the sovereign debt crisis began 2 years ago and the Yen has grown about 10% in the last 6 months alone. The MSCI Europe Index, a measure of 450 stocks shows that Eurozone equities are currently cheaper than they have been 98% of the time since 1995. So although the currency isn’t an attractive venture for foreign investors, money is still being pumped into the Eurozone through big-money international takeovers according to Jean-Baptiste Charlet, head of global industries for Europe, the Middle East and Africa at Morgan Stanley: “International companies are stepping up their focus on Europe, the euro crisis still scares them, but there’s a lot of technology to be gleaned and the companies are very well-developed internationally.”

Cutting Edge Current Affairs Courtesy of:
Josh Ferry Woodard 

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