Pound Dollar Report - GBP USD Rate Steady in Spite of Concerns Over Commerzbank and Spanish Debt Yields

23 Nov 2011 at 6 AM - Written by John Cameron

STORY LINK Pound Dollar Report - GBP USD Rate Steady in Spite of Concerns Over Commerzbank and Spanish Debt Yields

The Pound Euro exchange rate (GBP EUR) is 1.1603. The Pound Dollar exchange rate (GBP USD) is 1.5622. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5994.

Monday’s shift out of riskier assets continued into yesterday’s session, as global equities markets continued their downward slide.

There were plenty of reasons for investors to be pessimistic about the future prospects for the global economy. Yesterday afternoon’s US GDP growth figures for quarter 3 showed that the world’s largest economy had expanded by only 2% in the three months to the end of September. This represented a significant downward revision from the 2.5% figure, which initial estimates had pointed to.

Elsewhere, UK High Street travel giant Thomas Cook looks to be in dire trouble. Yesterday saw the company’s share price collapse by over 75% as Directors entered into emergency talks with banks to increase their lines of credit following a dip in trading due to political unrest in Egypt and Tunisia, as well as the Thailand floods. The company, which owes almost £1bn, is now facing a grim fight to survive, placing thousands of British jobs at risk.

Meanwhile in the Eurozone, the share price of Commerzbank, Germany’s second largest retail bank, tumbled to close down by 15% on the day, following reports that it may need to issue a cash call for €5bn in order to boost its liquidity.

Staying in mainland Europe, there was further bad news regarding the Eurozone’s ongoing debt crisis as the new Spanish government held its latest bond auction. The markets issued a resounding vote of no-confidence in the new administration, as yields on three month Spanish bonds increased by over 100% from 2.29% to 5.11%. The interest rates which Spain’s government was forced to pay on six month bonds was even greater at 5.227%.

Given the wealth of bad news across global financial markets, it was surprising that the US Dollar was not more strongly bid. The Greenback ended the European session virtually level on the day against both the Pound and the Euro. However, if today’s session sees more bad news, then the GBP USD rate is sure to come under further selling pressure.


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