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January 2016

Daily Currency Insight

Published: Monday 18 January 2016

  • Oil down to 2003 lows
  • Share markets still sliding
  • US holiday, so quiet markets likely

After a tumultuous week in which shares tumbled, analysts predicted the end of the world as we know it and both oil and commodities slumped. Monday feels like a damp squib. It is not just the fact that it is a US holiday (Martin Luther King Day), the lack of data means there are less reasons for traders to chance their arms.
 
That won't be the case for the whole week; far from it. Overnight into Tuesday, we will see enough Chinese data to get pulses racing. Another drop in industrial production is expected, a small drop in retail sales, a tiny dip in GDP growth and flat levels of investment will be enough to keep the pressure on the Yuan and to further weaken commodities.
 
The rest of the week brings a whole heap of UK data including inflation of both the producer and consumer variety, retail sales, unemployment data and public sector borrowing levels. The Bank of England will be watching all of that with interest but Sterling is unlikely to get the rebound it probably deserves. Sterling has been hit by the strength of the US Dollar and the weakness of export markets like China and Europe. Fundamentally thought, the UK economy is in relatively good form.  Sterling seems to have been hard done by and is now looking very oversold. If you are a Sterling buyer, if I were you, I would have a good look at my needs and protect yourself against the Pound rebounding.
 
This week also brings a likely interest rate cut from the Bank of Canada in response to slowing exports and poor domestic activity. Look out for opportunities if you are a CAD buyer.
 
We will get an interest rate and QE announcement from the European Central Bank but no change is expected. That doesn't mean they shouldn't add further stimulus to the economy but they have announced a plan and are likely to stick with it for now. They will have Eurozone inflation and Purchasing Managers indices to mull over before they decide but I think we know the outcome.
 
And that’s about it. Oh other than the fact that anglers may be flocking to the island of Rum off the West Coast of Scotland. Scientists have discovered earth worms that measure 16 inches long (that's 400mm in new money). It's the perfect spot; massive bait, remote location and every chance of coming back with stories of fish that were Th-i-i-i-i-i-i-i-i-i-i-i-i-i-s big but got away.
 

The Piper

 
 A bagpiper was asked by a funeral director to play at a graveside service for a homeless man.
He had no family or friends and the service was to be a pauper's funeral in a remote Chapel of Rest not far from Loch Fyne.
 
As he was not familiar with that part of Scotland, the piper got lost. He finally arrived an hour late and saw the undertaker had gone and the hearse was nowhere in sight.
 
There were only the diggers left and they were eating lunch. He felt awful that he had missed the funeral. He apologized to the men for being late and went to the grave side. Oddly there appeared to be a coffin made of cement or stone or something but, having never been to a pauper's funeral, he thought that this was how they do things now. He didn't know what else to do, so he started to play.
 
The workers put down their lunches and began to gather around.  He played his heart out for this man with no family and friends. He played like he'd never played before.
 
And as he played 'Amazing Grace', the workers began to weep. They wept, the piper wept.
 
When he's finished, he began to pack up his bagpipes when one of the workers came across and shook my hand. He said, I never seen anything like that before, and I've been putting in septic tanks for twenty years."
 
(Thank you to Philip for this) 

 
 
FX Research by David Johnson
Daily Currency Analysis with Michael Hart