Outperformance Continues to be the Theme for EUR and JPY
GBP/USD is currently trading at about 1.4530, GBP/EUR is trading at about 1.3330, so GBP/USD is roughly where it was this time on Monday and GBP/EUR is a little bit lower than where it was this time on Monday. Euro and the Japanese Yen have continued to outperform through 2016, with the outperformance coming from the desire for haven trades away from risk around the Chinese economy and Chinese liquidity in particular, but also falls in oil prices and falls on equity markets in moving traders into the euro and Japanese Yen.
Sterling unfortunately may also draw another negative day today, with the UK industrial and manufacturing production is due at 09:30 GMT. We are predicting a fall in both of them through the month of November. The reasons for this is as a result of relatively high temperatures (not freezing temperatures) through the winter period in the United Kingdom would limit energy demand.
Capital Street Research Desk believes that the falls in oil prices as well would make sure that the marginally benefits of producing oil in the North Sea is also diminishing now as well. So that may limit the industrial and manufacturing picture in the United Kingdom. We have seen similar noises in the PMIs of late, so it won’t be a massive surprise, but it may continue to drive the Sterling lower.
Oil prices continue to fall overnight, as price continue to dip towards the $30 a barrel level. OPEC is not at all signaling that there’s going to be an emergency meeting to discuss the continual falls in prices. Saudi Arabia is definitely getting what it wants, in so much that it’s still attempting to try and put U.S. Shale operators out of business.
The Chinese Yuan and the Chinese equity situation has calmed a little bit overnight. The People’s Bank of China is managing to bring in that divergence between onshore and offshore yuan, to make sure the speculators stay away from the currency for a little while. That seems to have worked overnight and that stability is being felt in Asian market at the moment.