Subscribe to RSS

Gold finds inspiration as Yuan furthers emerging market woes

Global markets are continuing to face downside pressure and are exposed to further declines after the People’s Bank of China (PBoC) shocked the financial markets for the second morning running by devaluing the Yuan once again. The USDCNY has now sky-rocketed from 6.22 to as high as 6.59 in just over 24 hours, which highlights how huge the concerns are within China over the recent declining exports numbers, and how internally motivated they are to enhance export competitiveness. Everyone knows that the China economy is slowing down and facing significant downside pressures, the economy is vulnerable to falling below the government’s 7% GDP target and both the PBoC and Beijing government will do whatever it takes to defend this benchmark.

What the markets need to realize is that the China economy has been suffering from reduced inflation and declining domestic momentum for quite some time, however the export numbers over the weekend highlighted an emerging risk that there is even slower demand for Chinese products, and that the economy is exposed to weakness outside of mainland China. If this risk intensified and exports continued to decline, this would have likely all but confirmed that GDP growth will fall below the government target of 7% and China will do whatever it takes to ensure this risk is reduced. The economy is going to remain vulnerable and exposed to falling below 7%, which means that the markets need to get used to waking up to further headlines from China, and this will likely include news regarding further currency intervention, interest rate cuts and support to the Shanghai Composite Index.

Why have emerging markets suffered the most? This is not just limited to exports to China becoming more expensive, but also because these economies need to adapt to a new era where they become less reliant on trade with China. The China economy is in a complete transition stage where it is attempting to move away from importing goods and focusing on domestic growth. By devaluing the currency they have not just enhanced export competitiveness,but also improved inflation expectations because a weaker currency is inflationary in itself while also inspiring consumers to look more for domestic products. Emerging markets are now going to suffer from a downturn in exports at the same time that the aggressive selling in commodity markets has resumed, meaning that we can expect further currency weakness throughout the second half of the year.

Gold has benefited the most from the situation in China because the metal looks set continue building on the strongest rally seen in months. Gold has jumped close to $30 over the past two days and its ability to move after the devaluation of the Yuan will erase those concerns that Gold has lost its appeal as a safe-haven. Everyone will now be awaiting for any clues from the Federal Reserve on how this move might impact their attentions to begin raising US interest rates and if it does, there is inspiration for the Gold bulls to continue recovering what have been stunning losses over the previous couple of months.

I personally do not believe that this move from China should impact the Federal Reserve in regards to when it begins raising US interest rates. The US economic data is consistently robust and raising optimism that the economic recovery is sustainable. This is enough of a reason to inspire the Federal Reserve to carry through with their repeated pledge to begin raising US interest rates in 2015. However, a previous FOMC statement did highlight that the central bank were monitoring international risks and with the recent developments in China and resumed selling in commodities widening the woes for the emerging markets, these international risks are growing.

0 commentsback to post

Add your comment

Nickname:
E-mail:
Website:
Comment:

Other articlesgo to homepage

FX Circuits Live Forex Trading Contest – Forex Time

FX Circuits Live Forex Trading Contest – Forex Time(0)

ForexTime latest Live Contest Win cash prizes from a $400,000 total prize pool. FX Circuits rewarding clients with real, withdrawable from a $400000 total prize pool.* Link:  FX Circuits Live Trading Contest Link:  Demo Forex Trading Contest Link:  Loyalty Cashback Promotions Link:  200% Withdraw able Cashback Rebates Available to:   New Clients only Contest Offer: ForexTime

20% Unlimited Bonus on Your First Deposit – FidelisCM

20% Unlimited Bonus on Your First Deposit – FidelisCM(0)

20% Unlimited Bonus On Your First Deposit to All new traders. If you have a $30 Deposit Account with FidelisCM then add wings to your ambitions and receive a 20% Tradable Bonus Link:  20% Bonus On Your First Deposit Available to: All new traders Ending Date: 30 June 2017 Bonus Offer: Get 20% Unlimited Bonus

100% Real Money Cash-Back Bonus Promotion – UFX

100% Real Money Cash-Back Bonus Promotion – UFX(0)

100% Real Money Forex CashBack Promotion to all new and existing clients. Join and gain exclusive access to the ONLY online trading 100% Forex Cashback rewards bonus program Link:  $5000 BitCoin Rewards Bonus Promo Link:  $50 Forex No Deposit Special Bonus Link:  $50 Free No Deposit Bitcoin Bonus Link:  100% Real Money CashBack Promotion Bonus

Get 25 EUR Welcome Free Forex Promotion – Tradeiam

Get 25 EUR Welcome Free Forex Promotion – Tradeiam(0)

Get 25 EUR Welcome Free Forex Promotion first 100 persons who become a client of the Tradeiam Company in any country. The Free Bonus amount of €25 will be deposited by the Company in the Clients Trading Account Link:  25 EUR Free Welcome Promotion Available to: All new traders Ending Date: 31 December 2018 Bonus

100% Bonus on your $100 Minimum Deposit – AvaTrade

100% Bonus on your $100 Minimum Deposit – AvaTrade(0)

100% Forex Special Bonus Offer to your first deposit Up to $300. Start trading today and in honour of our Irish roots we’ll give you a St. Patricks Day special bonus of up to 100% Link:  100% Special Bonus to Your First Deposit Available to: All new account Ending Date: 31 December 2017 Bonus offer:

100% Binary Cash Match up to $1000 – Markets World

100% Binary Cash Match up to $1000 – Markets World(0)

100% Binary Options Cash Match up to $1000. We’ll match your first deposit with up to $1000 To claim this match , simply enter voucher code 100CM in the deposit section. Link:  $10 Binary Options No Deposit Bonus Link:  100% Binary Options Deposit Bonus Bonus Ending Date: 31 December 2018 100% Binary Options Cash Match

Free Forex Trading Signals via SMS and Email – Trade12

Free Forex Trading Signals via SMS and Email – Trade12(0)

Receive Forex Trading Signals for Free via Phone SMS and Email to all Trade12 new traders and 100% Forex Welcome Deposit Bonus to your Live Trading Account. Link:  Free Daily Forex Trading Signals Link:  Get 100% Welcome Deposit Bonus Link:  50% Exclusive Deposit Bonus Available to: All new clients Ending Date: 31 December 2016 Bonus

$100 Free Bonus and $30 No Deposit Bonus – AYREX

$100 Free Bonus and $30 No Deposit Bonus – AYREX(0)

$100 Free Win in just one hour No deposit required bonus Binary Blast the Contest is a competition open to all AYREX account holders via demo accounts created automatically upon registration and used solely for contest participation Link:  $100 Free Win in Just One Hour Link:  $30 Binary Options No Deposit Bonus Link:  30% Binary

Welcome Bonus Account Risk-Free with $30 – Tickmill

Welcome Bonus Account Risk-Free with $30 – Tickmill(0)

Free Welcome Bonus Account Risk-Free with $30. Experience one of the best forex trading environments in the industry risk-free with $30 Welcome Bonus Account. Link:  Weekly Demo Race Trading Contest Link:  $30 Forex Free Welcome Bonus Link:  Forex Monthly Live Trading Contest Available to: All new traders Ending Date: 31 December 2018 Bonus Offer: Free

Earn $30 Forex Trade-able Credit Bonus – Forex Time

Earn $30 Forex Trade-able Credit Bonus – Forex Time(0)

Switch to ForexTime and Earn $30 Forex Trade able Credit Bonus. Join the hundreds of thousands of traders around the world who have already chosen ForexTime as a broker and Earn $30 tradeable credit as a thank you for switching. Link:  Receive $30 Tradeable Credit Bonus Link:  Loyalty Cashback Promotions Link:  $4 Cashback back for

read more

Forex Featured Broker

Contacts and information

ForexDepositNews.com Forex Deposit Bonus, Forex No Deposit Bonus, Forex Live Contest, Forex Demo Contest, Free Forex Bonus Forex Brokers Review and Other All Forex promotions.

ForexDepositNews.com

Social networks

Most popular categories