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Tuesday, 6 December 2011

Currency News Roundup

eurozone, bad credit, Merkozy

An RBA interest rate cut in Australia from 4.50% to 4.25% has sparked a small selling spree of Australian Dollars. The high interest Aussie Dollar benefits from its seductively high yields, but the commodity currency is facing pressure as a bearish outlook looks to send investors elsewhere. The Pound has gained on the AUD despite Halifax House Prices falling by 0.9% in November.

Good news from the Eurozone has helped to offset a mixed set of announcements yesterday. European GDP has grown by 0.2% in Q3, although predictions had suggested an improvement of 0.4% and German Factory Orders increased by 5.2% in October, whereas analysts had predicted negative growth of -4.6%.

French President Nicolas Sarkozy and German Chancellor Angela Merkel made announcements yesterday on the future of the Eurozone. The pair who are more and more frequently being referred to as 'Merkozy' restated an absolute determination to support the Euro and re-assert the single currency as a staple of the European Union.

However Merkel and Sarkozy’s good work was immediately undercut by Standard & Poor announcing that they had put 15 of the 17 Euro-nations on credit watch. Of the 15 nations the most notable inclusions were the AAA rated Germany, Luxembourg, Netherlands, Finland, Austria and France. S&P said that credit downgrades of 1 or 2 ratings were possible for the 15 countries (1 rating downgrade: Austria, Belgium, Finland, Germany, Netherlands and Luxembourg, 2 rating downgrade possible for all the others). Greece and Cyprus were the only two Eurozone countries not put on credit watch; Cyprus were already on watch and Greece currently holds the world’s worst credit rating: CC.

Although no real market change has taken place yet, the US Dollar is set to benefit most from the conflicting data emanating from the Eurozone. The threat of lowered credit ratings for the EU big-boys signals negative economic outlook for the Euro. Lack of short-term, immediate stimuli (ECB purchasing or Euro-wide bonds) albeit delivered with a veil of EU unity from ‘Merkozy’ may prove costly, but it seems markets are waiting for the EU summit on Friday to make their moves.

GBP/AUD – 1.526.

GBP/USD – 1.560.

GBP/EUR – 1.164.

EUR/USD – 1.339

USD/AUD – 0.977

AUD/EUR – 0.762 

Cutting Edge Current Affairs Courtesy of:
Josh Ferry Woodard

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