Thursday Briefing: Pound Falls to Fresh 31-Year Low

July 7, 2016

The global currencies continue to react to Brexit, while central banks in the United States and Sweden have decided to keep their interest rates on hold and avoided doing anything rash amid the uncertainty and volatility in the markets. The state could be improved soon with the recent acquisition of U.S.-based Nortek by U.K.-based Melrose for $1.44 billion. This could inject the much-needed positivity into the markets and convince the investors to stay with the U.K. Until then, read on to find the important news of today on Sentifi.


1/ GBP: Falls to a fresh 31-year low

It’s a bad day for the pound as it’s fallen to a fresh 31-year low against the dollar at $1.2798. More British property funds have been suspended following Brexit, resulting in £15 billion frozen, which is estimated to be the biggest seizing up of investment funds sine the financial crisis in 2008.  The yield on Britain’s benchmark 10-year government bond also continues to fall to all-time lows, while gold and silver continue to rise in prices.

2/ USD: Declines following Fed’s policy meeting

The Federal Reserves has decided to keep the rates on hold during its June policy meeting as it is still waiting to see the impact of Brexit. While the investors are digesting the Fed’s decision, the dollar rose against the euro, fell against the yen, and stayed flat against the pound. The Fed may have to consider raising the interest rates soon as the meeting minutes pointed out the decline in hiring by U.S. employers was caused by the Fed’s decision to keep the rates on hold last month.

3/ SEK: Climbs as central bank keeps rates unchanged

The Swedish krona increases against the dollar after Swden’s Riksbank decided to keep the benchmark interest rate unchanged as concerns over the economic impact of Brexit continue to instill doubt into the central bank. Sweden has one of the lowest rates in the world, as the central bank has been keeping the rates in the negative since 2015. The bank is examining Brexit carefully to protect the currency and the stability of the country’s economy because the U.K. is one of Sweden’s biggest trading partners, accounting for 7% of Swedish exported goods.

4/ CNY: Depreciates amid Brexit pressure

The Chinese yuan has fallen to its lowest level since 2010. Surprisingly, global investors don’t seem to fret over it as they’re getting more accustomed to the currency’s movement, but China’s central bank needs to retrain the capital flows. Otherwise, the currency will continue to weaken, and it would spark concerns.

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