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January 2016

Daily Currency Insight

Published: Monday 04 January 2016

  • China's share slump to start the year
  • Manufacturing data takes centre stage

A very Happy New Year to one and all.
It was not such a Happy New Year in China where shares started the year so poorly that the share market was automatically paused and then closed early but not before shares had fallen 7% on the day. This all followed yet another drop in Chinese manufacturing activity, as shown in the Purchasing Managers’ Index. That fall prompted a weakening of the Australian and New Zealand Dollars; both of which lost 1.5 percent in the early hours of this morning. We may see some more of that in the days ahead unless China's markets rebalance themselves.
The other impact of the Asian excitement was a strengthening of the US Dollar. The Dollar is also being strengthened by the fall in oil and commodity prices. These are traded in USD, so the weaker base price for these assets allows for a stronger currency. The GBPUSD rate seems destined to test the 2015 low of $1.4560 or thereabouts.
The GBPEUR exchange rate starts the year stuck at the €1.3515 level which makes one Euro worth 74p. This level was very supportive on the Pound throughout 2015, so it will be a big break if 2016 sees the pound plunge below here. If it does, there is support at €1.3350 but a break of that level would open the door to a tumble to 1.2750.
We get manufacturing data from the EU, UK and US today and, oddly enough, only the EU set is expected to be better than the previous release. That could set the cat amongst the pigeons in these post-holiday trading hours. The rest of this week brings PMI indices for the service sectors in various locations as well as the minutes from the last Federal Reserve meeting and Friday's US employment report. It will be a busy week for volatility and an even busier week for people clearing the in-boxes of junk mail. Have a good one.
And I struggle with this concept. Zimbabwe's Bubye Valley Conservancy is selling 100 raffle tickets for $1,500 each. The winner will be taken on a safari and be allowed to shoot one male lion. The funds raised will, it is said, be used for lion research. Surely one of the animal charities with gazillions in the bank (as some do) could afford to front up the $150,000 and ensure no lions are injured in the name of research. This smacks so much of the Japanese whaling for 'scientific reasons' that we all believe in ...don't we.

Seen online

There was a time when people kept diaries and got angry when anyone else read them. Now they put everything online and get mad when people don't.
Daily Currency Insight by David Johnson

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