HiFX comments on China’s Black Monday
Chris Towner, director of FX advisory services at foreign currency specialists, HiFX, comments on China’s Black Monday:
“Risk aversion is back in the financial markets. A combination of threats of tightening monetary policy in the US and UK with China slowing has created nervousness and this nervousness is now spreading to panic. The chances of a rate hike now in September in the US has reduced from a probability of over 50% to a possibility of less than 5%.
“The interesting dynamic here though is in previous forays of panic, the US dollar has strengthened; however as the US dollar is over-valued, it is the euro that is the currency in demand.
“This is feeding through to GBP/EUR and last week we were dealing up at 1.4200 and this week we are dealing at 1.3650. We can expect more of this to come as well, as the market re-adjusts to the risk event that we don’t see any rate hikes in the US this year, as warnings yet again prove to be powerful enough to turn the market.”
