Foreign Exchange Update : Soft Global Economic Data Releases Send EUR CHF and USD CHF Rates to New Record Lows

June 2, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Update : Soft Global Economic Data Releases Send EUR CHF and USD CHF Rates to New Record Lows

The Pound Euro exchange rate (GBP EUR) is 1.1371. The Pound Dollar exchange rate (GBP USD) is 1.6332. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5381.

A series of poor data releases and renewed concerns over the Eurozone sovereign debt crisis saw share markets plummet following Tuesday’s day of gains for equities.

The Dow Jones suffered its largest daily loss for ten months on the day yesterday, whilst the FTSE 100 closed down by over 1%. The theme of risk aversion continued into last night’s Asian session with the Nikkei 250 and the Hang Seng both dropping by over 1.5%.

Several key risk events caused the downward shift in global appetite for risk; yesterday’s Asian session set the tone when GDP data released in Australia showed that the Australian economy had suffered its most pronounced quarterly contraction in growth for over twenty years.

On its own, this disappointing Australian growth data might not have been enough to dent global risk appetite, as many analysts attributed the Australian economy’s contraction to extenuating circumstances, (i.e. the Japanese tsunami, the earthquake in Christchurch, New Zealand and extreme domestic climactic conditions).

However, as the session progressed, global data releases proved to be of a generally soft nature. The European session began with a worse-than-anticipated Eurozone PMI Manufacturing Survey for May.

Things got worse when the US opened for business. The ADP Employment Change figure for May printed at a dismal 38,000, versus analysts’ expectations that it would show that 175,000 new jobs had been created in the States last month. This number bodes ill for May’s key Non-Farm Payroll figure, due for release tomorrow.

Things got much worse with the release of May’s ISM Manufacturing survey in the States a couple of hours later. The survey showed that manufacturing output in the US slowed to its lowest level since 2009, raising doubts over the strength of the economic recovery in the States.

Finally, as the European session drew to a close, leading Ratings Agency, Moody’s, announced that it was once again downgrading Greece’s sovereign debt rating from B1 to Caa1, citing its doubts over Greece’s ability to re-structure its debt commitments in order to avoid default as its primary reason.

The dramatic reversal in global appetite for risk has seen strong support for safe haven currencies, with the Swiss Franc rising to its record level against both the US Dollar and the Euro yesterday. The Dollar also fared relatively well, with the GBP USD exchange rate closing down by 0.77% at 1.6335 as institutional investors sought out the safe haven of the US Treasury Bill.




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