• Thai central bank reverses controls on equity investment
• The FX market gears up for massive data days on Thursday and Friday this week

Market overview

After the draconian controls imposed by the Bank of Thailand pushed the Thai stock exchange down 16% in one day, the Finance Minister back tracks by removing the restriction on the equity markets (the restrictions remain on bonds and commercial paper). This is good news for the Thai baht which has consolidated but some would say the damage has been done and credibility has been dented. The US Dollar suffered badly on safe haven flows yesterday stemming from the Thai currency story and failed to gain on very strong US November purchasing price index which rose by the most in over 30 years. US November housing starts also came out better with a rise of 6.7% but were largely negated by building permits which fell for the 10th straight month. This morning we get the release of the Bank of England Monetary Policy Committee minutes which should be 9-0 in favour of interest rates on hold and the Office for National Statistics releases public sector net borrowing as a measure of the public’s finances. Otherwise we get little in the way of economic releases to move the market but in thin Christmas markets we don’t need news releases to generate volatility. On a sporting note, it’s a very sad day for cricket fans as Aussie legend Shane Warne announces his international retirement after the current Ashes series. With 699 wickets he is easily the best bowler the game has ever seen and possibly the best sportsman I have had the pleasure to see in my lifetime (which is something coming from a Kiwi)…’onya Warney’.

Currency - GBP - US $

The Pound / US Dollar exchange rate has rebounded strongly from $1.94 levels, as key Fibonacci support holds. The US Dollar has had a bad week and has reversed a 3 cents gain after a great start to the month where strong US data releases underpinned the “out-of-trend” greenback. Events in South East Asia have weighed heavily on the US Dollar and this could be the catalyst for another test of the October high. December is traditionally a bad month for the greenback so the start of the month was bucking the trend and a turnaround was always on the cards. Buyers and sellers of US Dollars should get a chance to benefit from volatility over the next 2 weeks so don’t despair. If you have a USD requirement coming up please ensure you speak with your FX Consultant and get your automated currency orders in the market by Friday, so we can get them in our Global Order System to take advantage of this expected movement. In the FX market, December is often the currency equivalent of the January retail sales, so don’t miss out.

Currency - GBP - Australian $

Australian Treasurer Peter Costello revised Australia’s gross domestic product growth for the year to June 2007 to 2.50% from 3.25% in the mid-year budget and fiscal review. The downgrade is due to concerns over the drought which is hurting the rural economy and will impact on Australia’s export growth which is now forecast to fall from 7.0% to 4.0% for the fiscal year. This put pressure on the Aussie Dollar overnight and has provided a welcome push higher in GBPAUD toward the range highs. Our Aussie Dollar order book is stacked with automated currency orders which we’re working hard to trigger in the next few weeks if this weakness persists through the Christmas period.

Thought for the day

I must have said it 14,000 times. I have retired and I have no aspirations to return.

Shane Warne

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FX Research and Analysis undertaken by:
David Johnson - Halo Financial