- China shares cause another shock
- USD reaching resistance level
The global markets were once again shocked by the slump in Chinese share prices yesterday. The Asian, European, UK and US markets all followed the Shanghai index decline like little lambs but we have seen a little more stability overnight. The Japanese Yen is considered an Asian safe haven and it strengthened as the Yuan declined but the Yen weakened a little overnight last night.
Weakness in the Chinese economy generally translates into weakness in the currencies of China's suppliers and that includes the Australian and New Zealand Dollars. It also tends to weaken commodity markets which, in turn weakens the big commodity exporters like Canada, South Africa and the Latin Americas.
Two pieces of data helped the Euro yesterday. Unemployment fell to its lowest in 4 years although 1.05% is still dire. However, that plus the fact that German factory orders were surprisingly strong helped the Euro to strengthen again. The Sterling – Euro exchange rate has fallen to this 1.3320 level three times since the start of 2015 and each time the Pound has recovered. The chart and details below explain it a tad better but there is nothing on the UK data front to boost Sterling today. If Sterling is to get a boost, it'll have to wait until next week.
Today's big data is the US employment report. The question on everyone's lips is whether the Federal Reserve moved too soon to raise interest rates in December. If the change in Non-Farm Payrolls is less than impressive, the naysayers will be out in force berating the Fed for jeopardising the fragile recovery. If the payroll count has grown by 220,000 or more, I suspect we will see further USD strength. Be prepared.
We will also get Canadian employment data and that is still a big worry for the Canadian authorities. At 7.1%, the unemployment rate is uncomfortably high and the slump in the value of Canada's exports will not have helped the mood amongst employers. Any deterioration in the labour market will be bad news for the Canadian Dollar.
And on this day in 1935, Elvis Presley was born. What is quite interesting is that David Bowie was also born on this day in 1947. Two men who transformed the world of popular music in their own very unique ways sharing the same birth day; now that's an interesting fact.
I'll leave you to ponder that and to have a great weekend. Can you believe it's the 8th already!
During a power cut, a redneck's wife goes into labour. The Doctor is called because there is no time to get her to hospital. He gets the redneck to hold up a storm lamp so he can assist the wife. After a short while, a baby is born and yells her way into the world. "Congratulations, you have a daughter," says the Doctor. "But", he adds, "keep the lamp there. I think there is another baby".
Sure enough, a few minutes later, he holds a second baby in his arms. "You also have a boy", he says to the redneck. "But please keep the lamp up, it looks like there may be another".
"No sir. I ain't doin' that", says the redneck. "I think the light's attracting 'em."
FX Research by David Johnson
Daily Currency Analysis with Denzil Rickerby