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January 2016

Daily Currency Insight

Published: Tuesday 19 January 2016

  • China's economy slows to weakest growth in 25 years
  • Sterling up against Euro ahead of UK inflation
Monday was a ho-hum day as a lack of data and a lack of US traders left the markets meandering in narrow ranges. That all changed overnight when Chinese economic growth was reported to have slowed down to a 25 year low.  It seems the excessive growth party couldn't last forever after all but 6.9% is still an annual growth rate that most would envy and it was entirely in line with expectations. Perhaps more significantly exports shrank by 7.6% on the year which was a disaster compared to the Chinese Government's 6% growth target. These are dire numbers but many are of the opinion that the real figures are much worse than these.
The effect of these data releases was less impactful than you might have thought. The BBC seems obsessed with the data but Asian share markets were relatively sanguine as traders pinned their hopes on further stimulus from the Chinese authorities and China's supplier saw their currencies sitting reasonably flat; probably for the same reasons and because the poor data was largely already factored into the price.
Nearer to home, the Pound gained against the Euro overnight; probably more on profit taking and as the Euro was hit harder by the Chinese data than the Pound. This morning brings UK inflation of both the Consumer and Producer varieties. We think Consumer Price inflation will tick marginally higher as some of the falls in energy prices start to ease out of the data and as Christmas discounting eases off.  Input and output prices at the producer level are still heading south but perhaps the pace of that decline will ease and that would be Sterling positive.
The Eurozone also sees the release of inflation data but that is likely to remain at around 0.2%; hardly enough to register really. The Euro is back under pressure as the stark reality of Europe's lack of growth continues to make traders, question to why they were buying the Euro. And whilst there is very little chance of the ECB moving interest rates or bond buying budgets tomorrow, better safe than sorry. Traders will take some of their risk out of the market ahead of that announcement.
Overnight tonight we get the New Zealand inflation data. Most forecasters believe there will be an announcement of deflation in the order of 0.2% on the three months to December. The New Zealand Dollar, which has been rather more buoyant of late, could well shed some strength in the early hours. There is an opportunity to place automated overnight orders to capitalise on that. Speak with your Halo Financial Consultant to discuss how to do that.
In other news, we have further proof that Cambridge scientists need to get out more. Some of their boffins have announced that Spiderman - you know the fictitious, comic book red and blue guy – could not walk up walls unless he had size 89 feet. There are two things to say here. Firstly he is fictitious and secondly he is in fact, fictitious. I know that's only one point but I thought it was worth making twice. Whoever is funding these sorts of research projects, please stop.

On the ward

The phone rang on Ward 3 at St. Mary's Hospital. When the receptionist answered an elderly lady said, "Is it possible to speak to someone who can tell me how a patient is doing?"
Reception said, "I'll be glad to help. What's the name and room number of the patient?"
The old lady in her weak, tremulous voice said, "Norma Findlay in H section."
The receptionist replied "Let me put you on hold while I check with the nurse station for that room."
The receptionist returned to the phone after a few minutes and said, "I have good news. The nurse just told me that Norma is doing well. Her blood pressure is fine; everything is back normal and Dr Cohen has scheduled her to be discharged tomorrow."
The old lady was delighted "Thank you. That's wonderful. I was so worried. God bless you for the good news."
"You're more than welcome. Is Norma your daughter?" the receptionist enquired.
The old lady said, "No, I am Norma Findlay. These damned doctors keep me completely in the dark. "
FX Research by David Johnson
Daily Currency Analysis with Chris Verdet
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