Friday 16th September 2011
Good morning. Yesterday evening the worlds central banks have announced a co-ordinated move to try to help the financial system. The central banks are to provide commercial banks with three additional tranches of loans to help ease funding pressures. The news have calmed the markets, and riskier currencies such as the Pound have benefited. At 08:30am this morning rates are as follows:
• GBP/EUR 1.1427
• GBP/USD 1.5761
• GBP/AUD 1.5266
• GBP/NZD 1.9110
• GBP/CHF 1.3780
• GBP/CAD 1.5530
• GBP/ZAR 11.683
• GBP/JPY 120.96
• GBP/DKK 8.5090
• GBP/NOK 8.8291
• EUR/USD 1.3791
Central Banks in co-ordinated move
The move by the Federal Reserve, Bank of England, European Central Bank, Bank of Japan and Swiss National Bank will provide additional lending, and follows fears about the exposure of banks in the EU to eurozone sovereign debt. The debt problems had made the banks reluctant to lend and this in turn has created funding problems.
US and EU banks have been moving funds out of Europe recently because of these exposure fears, and this has been putting further pressure on the banking system. The new loans are being issued in dollars, because European banks can already access additional euro funds from the European Central Bank.
The news has been welcomed by the markets, with riskier currencies such as Sterling benefiting, and exchange rates rising slightly from the lows we have seen earlier this week. But while analysts have welcomed the move, they have also warned that more will still have to be done to tackle the underlying problem of high levels of eurozone sovereign debt.
A quiet end to the week. Some Net flow data from the US and consumer sentiment survey also from the US are the only releases of note.
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