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Exchange Rates: Australian Dollar, New Zealand Dollar & Rand Rate Losses Forecast On Eurozone Sanctions

July 29, 2014 - Written by John Cameron

Currency News UK: FX - Australian Dollar, New Zealand Dollar & Rand Exchange Rate Losses Forecast On Eurozone Sanctions - Global share markets have posted decent gains during today’s session in spite of the presence of significant pockets of geo-political risk in the global economy. London’s benchmark FTSE 100 was trading up by 0.62% during its final hour of trading, while Frankfurt’s Dax had gained almost 1.00% on the day.

In spite of pleas from the international community, Israel has stepped up its aerial bombardment of the Gaza strip during today’s session, with reports of up to 100 further Palestinian deaths within the past 24hrs.

A quick look at the the latest foreign exchange market positions today:

The Pound to Australian Dollar exchange rate is trading up 0.17 per cent at 1.81670 GBP/AUD.
The Pound to New Zealand Dollar exchange rate is trading down 0.13 per cent at 1.98950 GBP/NZD.
The Pound to Rand exchange rate is trading up 0.06% per centat 18.08653 GBP/ZAR.

The Tel Aviv administration has warned that the ongoing conflict in the region is unlikely to end any time soon.

Meanwhile, the European Union confirmed earlier today that it will be introducing deeper and more meaningful sanctions against Russia as anger at Moscow’s indirect involvement with the shooting down of Malaysia Airlines flight MH17 fails to abate. The punitive measures against companies in the former Soviet state’s defence, finance and in particular energy sectors are likely to weigh heavily on global appetite for risk into the medium to long term.

In the short term, the mere threat of such an action was enough to hamper the progress of one of the most blue chip of blue chip shares in London’s FTSE 100 index. BP PLC (BP.L) – the world’s sixth largest oil producer – announced an apparently stellar set of half-yearly results earlier on. The figures revealed a pronounced jump in profits – up by a hefty year-on-year 34% to $3.635bn. However, BP’s share price was trading down by some 2.89% at its intraday low following the release.

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The reason behind the slump in BP’s share price lay in the commentary which accompanied the results; Chief Executive Officer Bob Dudley’s statement noted the potential difficulties which any sanctions from the West could have on the profitability of Russian state oil company OAO Rosneft, which BP owns almost one fifth of. Dudley observed that, ‘any future erosion of our relationship with Rosneft, or the impact of further economic sanctions, could adversely impact our business and strategic objectives in Russia, the level of our income, production and reserves, our investment in Rosneft and our reputation.’ It appears likely that other major European companies will be similarly exposed to these new sanctions.

The usual suspects in the global currency markets are likely to ship support if global appetite for risk does slump. In such a scenario, expect the South African Rand (currency:ZAR), Australian Dollar (currency:AUD) and New Zealand Dollar (currency:NZD) to post hefty losses.

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