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January 2016

Daily Currency Insight

Published: Tuesday 12 January 2016

  • GBPEUR at crucial technical level
  • GBPUSD stays at 5 year low
  • China intervenes to stabilize markets

There wasn't a lot to write home about on Monday. Market participants in all asset classes are nervous about the slowdown in China and the ramifications of that in commodity, share and currency markets. The fact that the People's Bank of China injected CNY 80 billion into the markets overnight shows that they are equally concerned. Their actions overnight were in response to suggestions in the markets that the Yuan could drop another 10% before it finds a bottom and that, in the words of Mary Berry, could be a soggy bottom. A new report from Fathom, a research company in London suggests that China's economic growth may be much slower that China's own calculations. The Chinese authorities see growth at 6.8% but this report offers 2.4% as a more accurate growth rate.
 
Whatever their growth rate, the bank that we own, RBS is suggesting their investor clients should sell everything because they think stock markets may shed 20% and oil will drop to $16 a barrel. "We're all doomed Captain Mainwaring".
 
Meanwhile, Sterling is hovering at the bottom of its long term ranges against the Euro and US Dollar. A fall through €1.33 could make people start to believe the RBS disaster scenario and would open the door to a €1.2750 visit. A fall below the 5 year low in the GBPUSD rate would bring $1.34 into sharp focus and that is not good for the UK inflation prospects as so many goods are imported against Euro and USD invoices. It is likely that today's release of UK industrial and manufacturing output will yield an improved set of industrial numbers and a fall in manufacturing activity. That is the expectation at least but with car sales going through the roof, we may be pleasantly surprised.
 
This though is the most interesting piece of data today so it isn't a big day for data but the China impact is still being felt and we cannot rule out another bout of volatility from that.
 
Aside from all this, I am left wondering when I read about the couple who had their deceased boxer dog cloned at a cost of £67,000. It appears they will end up with identical looking dogs as a result but you can't clone a personality. Even identical twins don't arrive with matching personalities. So what is the point? Wouldn't it be better to get another boxer or rescue a dog and put most of the £67,000 cloning fee into something worthwhile?
 

 Finders Keepers

 
An elderly couple were walking home after having had a lovely day of reminiscing. Their final visit was to the gates of the school where they had met and fallen in love 65 years earlier. As they wandered home past the shops and the bank, a security man dropped a bag on the floor as he climbed into his armoured van and he drove off before Bert could alert him. Betty opened the bag and saw that it was stuffed with used notes.
"We ought to give it back", said Bert but Betty said, "Finders keepers" and dropped the bag into her handbag before heading off. Bert caught her up and remonstrated with her all the way home. She wouldn't budge and when they arrived home, she put the bag in her dresser drawer saying, "If no one asks about it for a month, we'll keep it."
A few days later the police were knocking on doors asking if anyone had seen the money bag. Betty said that they hadn't but Bert butted in; "It's in her dresser." He said to the officer.
"Really?" said the cop.
"Oh don't listen to him, he's senile," said Betty.
Bert started to interject again when Betty said, "Go then Bert; tell them what happened."
"Well", said Bert, "We were coming home from school on Monday when...."
"The sergeant cut him off at that point. Waving to his colleague and smiling sympathetically to Betty he said, "Sorry to have bothered you ma'am".   
 
FX Research by David Johnson
Daily Currency Analysis with David Johnson

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