Pound feeling affect of stock market crash

7 January, 2016

Ashley Finill

The Pound’s gains from the start of the week are now diminishing as the Eurozone have posted positive data over the past 24 hours and have clawed back the Euro’s recent losses. The Pound has lost 2 cents since the start of business yesterday with negative Markit service PMI data coming out of the UK, whereas the Eurozone have announced the same data but produced positive figures. The biggest hit for the Pound has been against the Dollar as we have now hit 5 year lows. This comes as the Chinese Stock market shut down again, which triggered the market circuit breaker for the second time this week. As a result investors will take less of a risk investing in the Chinese stock market and will instead look to keep their funds in a safer place.

The US have recently increased interested rates and are experiencing a relatively healthy economy, so investors will turn to the US Dollar which will result in a stronger Dollar and in turn will weaken the already deteriorating Pound. Should the Chinese stock markets continue to shut down we are sure to see the Dollar strengthen significantly and the pound continue to fall so this will be something to look out for in the coming days and weeks.

A few notable data releases today – retail sales have already been posted from Germany at a negative figure of 2.3% from the previous 2.5%, Germany also released Factory Orders which came in better than expected. At 9am this morning we saw positive Italian data as unemployment figures were up 0.2% from the previous announcement. At 10am the unemployment rate from the Euro zone will be posted with the consensus predicting no movement from 10.7%. This afternoon at 13.25 the Governor of the Bank of Canada speaks and at 13.30 the US releases jobless claims figures.