Chinese to aim for free floating Renminbi

March 29, 2016

A major cause for concern for investors at the start of this year was the state of the Chinese economy, and specifically the government’s ability to maintain their currency policy. There were significant concerns over the level of outflows from the country, potentially decreasing the central bank’s reserves of foreign currency to the point that the Renminbi would experience severe depreciation. Since, the rate of decline has reduced significantly in February and coincided with a strengthening of the currency, indicating that there is a better balance in the market. The Chinese authorities have stated that it is their intention to move the currency to a free float pricing model over time. However, it is difficult to anticipate that the government will be willing to relinquish all of their control over what remains a very useful policy instrument, giving them a tool to affect inflation, competitiveness and capital flows.

With the four day week last week and low trading volumes, there was relatively little movement in the markets. UK CPI inflation was announced last Monday, coming in at 0.3% for February. Transport costs continued to provide downward pressure on the measure, however, with the recent 40% increase in underlying crude oil prices it would be reasonable to expect that there will be reduced pressure going forward.

US jobless claims remain stubbornly below average at 265,000 for the week ending 19th March. This figure goes hand in hand with the high levels of job growth that are continuing to be seen. It appears that the US remains very strong domestically and the storm clouds that were gathering at the start of the year have not affected managers’ decisions regarding employing new workers.

Index Open Close Change % Change
FTSE 100 6186 6106 -80 -1.29%
S&P 500 2049 2035 -14 -0.68%
Dax 9950 9851 -99 -0.99%
Cac 40 4462 4329 -133 -2.98%
Nikkei 225 16724 17002 278 1.66%
UK 10 Year Gilt Yield 1.439 1.428 -0.011 -0.76%

US consumer confidence and Non-farm payrolls are announced this week. Economists are anticipating another strong month on job growth.

About Strawberry Invest

Strawberry Invest is an online investment platform which allows you to open an investment account which offers a low-cost, easy-access, attractive investment solution for those new to DIY investment. As well as being able to open an investment account, there are a number of useful resources on investments within our Knowledge Hub such as tips for first time investors, investment risk, investment terms & definitions, how to pick investment funds, investment research centre and much more. If you wish to find out more about our investment platform please get in touch.