Home » Currency Note » Currency Note » Chinese demonstrations spook markets

The week started in a negative fashion for sterling, losing between 0.5 and 1% against the euro, US dollar and yen.

The cause looks to have originated on the other side of the world, with unrest in China that could affect global trade and has left stock markets jittery. This was reinforced by a report from the World Trade Organisation (WTO) saying that global trade is slowing, echoing a warning from shipping giant Maersk earlier this month of a looming global recession.

Why would all that affect sterling in particular? The pound tends to follow stock markets, which weakened yesterday, while currencies like the Japanese yen and US dollar benefit from safe haven status.

While there was little to interest the markets elsewhere with data releases, European Central Bank (ECB) president Christine Lagarde struck a notably hawkish tone in a speech, saying that inflation “still has a way to go” and the ECB will continue to raise interest rates. That could mean further 75 basis point rises in the months ahead. All eyes will, therefore, be on the preliminary reading for German inflation today at 1pm.

Elsewhere in the business news, BT avoided a staff walkout by agreeing to a further £1,500 pay rise.

Good news in the energy markets, where the National Grid has secured new supplies and cancelled plans to ask British households and businesses to reduce consumption.

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