The Pound lost a little bit of ground in some erratic trading against the Euro during the course of the day yesterday, though its path against the USD was far more flat and even tempered. Ultimately, we are still seeing lower and lower levels posted by the GBP as economic factors take further shape.
There’s considerable doom and gloom in the news as we open today, reflecting the third straight day of losses (again) in the Chinese stock market. Really, a lot of the story unfolding is pointing to worries about global demand. If global demand is weak, it puts a lot of pressure on growth for so many of the principal economies. To add to the weakness that China is producing, now we see manufacturing reports from both the Eurozone and the United States that could indicate an even wider spread of slowdowns and drags on demand.
We even have seen some flight to the Japanese Yen as a safe haven currency, despite the extremely low interest rates held there for long periods. Overnight the US stock market fell significantly, but thankfully we opened this morning with some signs of recovery and so today will be one to watch closely.
Italian GDP figures also surprised with some positive numbers, the impact on the market though we think is limited given that it is not considered top tier data. It does, however, fuel the “confidence in the Euro” fire as it adds to the overall outlook that the Eurozone is finding a level of stability; that with the “risk off” mentality in the market provides further reason to consider the single currency a safe haven for now.
Elsewhere, the price of oil faltered after the biggest three day rally in 25 years as overwhelming supply outweighs demand. The price of oil per barrel is expected to trade between $40-$60 into 2016. Looking at the longer term projections and comparing this to the price slump of 2014, the slide could be to the benefit of the UK economy as the cost of production decreases for UK oil dependent businesses.
This morning, UK Construction Purchasing Managers Index is due out shortly with a very slight increase in the figure expected. Not long afterwards, the Eurozone Producer Price Index is set to be announced and here there is little change forecast from the last figures we saw – which was negative. Perhaps a slight improvement on a yearly basis could arrive. Lastly, there is a number of fairly low level US data due, but nothing that in the current climate should move the currencies in the opposite direction.