Issues in the far east…


Cracks showing in the Chinese economy

Another financial crisis is competing for the world’s attention in China, The second largest economy in the world, where stock markets have tumbled in the few months. Over a period of four weeks, Chinese companies lost some $3.9 trillion in value—a number more than 15 times the size of the entire Greek economy. The Chinese government has employed a range of strategies to halt the slide. Sterling Euro exchange rates ended at their lowest level for many weeks last month as the problems in China impact upon global currency markets. The news from China was not good as initially they devalued the Yuan and then posted some very poor data for business activity and manufacturing, which means the US Federal Reserve are now less likely to raise interest rates in the US in September. With the currency markets having previously priced in an interest rate hike for the US this now means without an imminent rate hike we have seen a huge amount of Dollar weakness which often results in Euro strength. This has created some excellent selling opportunities for Euros into Sterling after a very difficult period for the single currency. Greece has now also received its third bailout of EUR 86bn which was ratified by the Germans and since then we have seen further strength for the single currency. The Eurozone’s largest economy Germany publish GDP figures at the end of August and this could either help to push the Euro even stronger.