Waiting for confidence returning back

[walid]

Waiting for confidence returning back

• It has been concluded that we are about to see economic growth decelerating in China but the tracking to the Chinese stock market was not expected to be by this shape.
• The IMF has said it clearly more than a week ago that it is expected to grow by only 6.8% in 2015 and by 6.3% in 2016. It was not the IMF only what expected this slow down but the Chinese government itself has expected so.
• The mining activities are expected to be under pressure to shrink, as the supply can hurt the prices of the industrial raw materials not only the oil which has been already suffering from higher supply from countries out of the OPEC and also from the OPEC itself which offers more than its 30m barrels a day target.
• The commodities prices meltdown can drive down the operational profits of the companies which are related to the mining sector globally.
• But in the same time, there are many manufacturing companies can get use of such falling of the raw material to grow up faster and represent cheaper products.
• In US and after this turmoil for restoring confidence in the markets, the Fed is widely expected to keep the interest rate longer, while the falling of the raw material prices can form further inflation down side risks.
• We see now currently significant rising of the European currencies and you can listen to many reasons.
• But mainly, it is because of 2 reasons, the first one is the interest rate outlook in US which went down, after the release of the FOMC's recent meeting minutes which have shown stronger than expected appreciation of the inflation downside risks in the case of normalizing the monetary policy by the first interest hiking since 2006.
• The second reason is about the current crisis which drove PBOC to devaluate the Yuan lowering its attractiveness of it as a reserve currency to be a step in the benefit of the Yen and the single currency which can be more attractive for Central Banks, Hedge Funds and also the investors who are looking for diversifying.
• Especially, as the Chinese step looked not only one step to revive the economy but it can be followed by more steps to support the Chinese exporting activity.
• China has already lowered the interest rate 4 times since last November, beside lowering the RRR of the Chinese banks several times and it is planning for letting the pension funds to invest in the Chinese domestic stock market as the BBC has announced by the beginning of this new week.
• The panic which has happened in the this new week can end shortly as the crisis is not looking unsustainable or threatening the global banking sector like the credit crisis for instance.
• We have not watched yet giant bankruptcies because of this crisis but only slowing down of the activities of the mining sectors on lower commodities prices can be positive for some other vital manufacturing activities even in China itself to find a point to rise from and ask for more commodities again.
• Anyway, we wait now for cooling down of the market volatility, after what can be named sharp correction waiting for confidence returning back to the markets.

Have a good day
Kind Regards
FX Market Strategist
Walid Salah El Din
Mob: +20 12 2465 9143
E-Mail: mail@fx-recommends.com
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