Urgent Market Update – China’s Black Monday

August 25th: Highlights

• Sterling suffers most volatile day in 6 years v Euro
• China crisis ‘a million times worse’ than Greece
• Black Monday sees plunging stock prices
• CAD sinks to 11 year low against GBP
• Aussie and Kiwi hit 6 year lows

Sterling Comment

Yesterday saw an eventful day in the foreign exchange markets, despite the fact that there was little released out of the UK from a data perspective. With China’s brewing crisis, which analyst Panos Mourdoukoatis believe is a ‘thousand times worse’ than Greece, risk aversion took hold.

GBP/USD opened yesterday’s trading session at 1.5628 and rose 1.2% over the course the morning to 1.5802. The cross consolidated its earlier gains to close at 1.5725, and is now trading in the region of 1.5782.

The British Pound recorded one of its biggest daily losses against the Single Currency, with GBP/EUR falling from 1.3771 to a low of 1.3462 once the US markets opened. We saw a 2.8% drop in a 30 minute window. Sterling has since recovered and is now trading around 1.37 levels

China Crisis

Yesterday was labeled ‘Black Monday’ as the market was dominated by a plunge in stock markets and rapidly falling commodity prices following the devaluation of China’s currency nearly two weeks ago. 5 trillion dollars has been wiped off the value of global stocks, with the lowest commodity prices seen in 16 years. With China in turmoil, analysts believe the Fed may well be delaying the rise of interest rates scheduled for September.

Global Comment

EUR/USD opened yesterday at 1.1361 before rising to a day high of 1.1711. The pair has retreated and is now trading in the region of 1.1494.

The Aussie and the Kiwi Dollars hit six year lows on Monday. Decline in Chinese manufacturing, its biggest trading partner, is hitting the currencies hard. We saw the Aussie weaken to highs of 2.2398 with the New Zealand Dollar hitting a high of 2.5361 against the pound respectively. We’re now seeing GBP/AUD trading at 2.1849 and GBP/NZD at 2.4134.

CAD plummeted to an 11 year low against the British Pound, touching highs of 2.0972, levels not seen since August 2004. The pair is now trading in the region of 2.0804.

Have a great day!