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China devalues again

China devalues again

The GBPEUR yesterday lost ground almost in one direction for the entire day in a likely response to the early announcement that the Greek bailout deal has been agreed – which has bolstered the single bloc currency. The GBPUSD, however, was flat throughout the course of the day with almost no meaningful movement from start to finish. Against other currencies, though, the USD has received wide support stemming from the issues affecting the second largest economy in the world, China.

In China, Asian stocks and emerging market currencies fell as, for the second day in a row, the Chinese Central Bank let the currency depreciate which has led to many investors looking for places to hide from the risk and volatility in lower yield/lower risk assets like government debt. For so long, the seeming position of the Chinese Central Bank has been to favour a higher currency value and this is quite a reversal with, already, some analysts suggesting that a longer term emphasis on a lower currency value for them will be on the agenda for some time ahead.

A significant nuclear deal is on the cards for the US and Iran which seeks to make Iran’s allies comply with the US sanctions concerning nuclear arms and capabilities. US Secretary of State, John Kerry, made very bold statements suggesting that if they did not go through with the deal and walked away from it…then the US could very well lose its status as the world’s reserve currency. That can easily be interpreted as scare mongering for someone who has keen interests on ensuring the deal goes ahead.

Today we finally have some good data to digest, firstly in the form of GBP jobs data including the unemployment rate and the claimant count. Then we get the Eurozone Industrial Production data and after this, US mortgage surveys and job openings surveys. Then NZ business Purchasing Managers’ Index and lastly the UK housing price balance survey. So expect some movement over the course of today’s trading, for sure.

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