As long as there’s another small bounce in the market, you can pause and think about something unrelated to the coronovirus. And the first challenger we haven’t thought of in a long time is, of course, the English pound. Britain has finally got out of the EU and started a completely independent policy.
The main outcome of the meeting of the Bank of England, last week, was the decision of a board member, who changed his mind in the direction of tightening monetary policy.
GBP/Dollar chart of the day
But on Monday, the pound fell sharply against all major currencies. The reasons are the same as we considered a month ago. It is not enough to become independent, now they need to solve a huge number of real problems. And these problems will certainly have a negative impact on the economy in the near future. Pay close attention to the chart.
As we noted in the previous newsletter, Friday’s decline of the US dollar was illogical. On Monday, the American currency turned around. Potentially, it has a better chance of further growth due to positive swaps and global economic risks.
STOCK INDICES IN CHINA
Yesterday’s 8% drop in major Chinese indices should not mislead anyone. It’s a volume accumulated during the holidays. Taking into account that the same Japanese index was losing 7% at the moment, the fall of Chinese stocks can be considered not very significant.
It is much more interesting how events will develop in 3-4 days, when even extended holidays will end. If the production does not open, the fall of the Chinese stock market, followed by the world stock markets, may become disastrous.
The oil keeps dropping. And there are already clear milestones. China has reduced its exports of black gold by 20%. And that’s 3 million barrels a day. It’s just a huge volume by market standards.
What awaits us today?
04.30 Australian Reserve Bank interest rate decision.
10.30 UK Construction Business Index January
16.00 US production orders for December
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