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January 2016

Daily Currency Insight

Published: Monday 11 January 2016

  • China still calls the shots for all the wrong reason 
  • BoE - No change expected but what are their plans?
David Bowie on stage at Live Aid performing Heroes is still one of the best and most poignant live performances I can remember. Anyone who grew up in the 70s and 80s will know how he changed music forever and his influence can be seen in so many artists of today's era. It is so very sad to hear that David has passed away at the premature age of 69. RIP Major Tom, Ziggy, Aladdin, Great White Duke et al and thank you for the memories.
 
As for the markets, last week was a story of declining Chinese fortunes, intervention from the Chinese authorities and mixed data from across the globe. The net result was a weaker Pound, stronger US Dollar, stronger Euro and vastly weaker Asian markets.
 
This week starts with further news from China; consumer inflation at 1.6% is in line with expectations but producer prices fell by 5.9% and that was worse than expected. It makes sense that the inability of one of China's major export markets; the Eurozone, to establish sustainable growth is bound to drag on China's economy.
 
Not only this, China's slumping demand drops the price of commodities and that weakens the supplier nations which in turn resulted in declining consumption. This spiral is hard to break but if we do see flickers of recovery in Europe and the US economy starts posting more consistent data, things can change.
 
This week also brings the Bank of England interest rate and QE announcements. No change will be forthcoming but the markets will be more interested in the hints of the timing of the first rate hike or controversially whether there is any discussion of further monetary expansion in light to the Chinese slump. Sterling's fate, for this week at least, lies in the BoE's hands, although the industrial production data; due tomorrow, may have an influence.
 
The Australian Dollar is being damaged by the Chinese fall out but we will get two pieces of data that could have a domestic impact. We'll see unemployment data from the land of down-under on Thursday and investment lending stats on Friday. Both sets of figures are expected to be a bit downbeat and the unemployment rate is forecast to rise to 5.9%. That'll not do the Aussie Dollar any favours.
 
And in other news could everyone please stand and join me in a minutes silence for the British National Party which is officially no longer. They failed to pay their £25 registration fee to the Electoral Commission so they cannot stand for parliament. Sorry... did I say silence? I meant laughter.
 

In the darkest jungle

 
An explorer is working his way through a remote part of Brazil when he comes to a clearing. At the edge of the clearing is an enormous dead buffalo. The beast must have weighed more than 2 ton. Next to the buffalo is a tiny pigmy, guarding the body. The pigmy, explains the guide, is from a local tribe that has only been seen six times in history and this chap, at about 4 foot tall, is considered quite a big chap for this tribe.
They approach carefully before the explorer gets his translator to greet the pigmy and ask whether he had killed the buffalo.
"He says yes he did", says the translator.
"How on earth did he kill it?" asks the explorer.
The translator asks the question and says, "He said he killed it with his club".
"Crikey", says the explorer, "How big is this club?"
The translator passes on the question and the pigmy goes into a long quite detailed explanation. Finally the translator turns to the explorer and says, "He thinks it's about 60 full members and over 130 affiliates."
 
FX Research by David Johnson
Daily Currency Analysis with Alastair Sweetman