The rollercoaster that is the Chinese stock market failed to disappoint overnight, with another whipsaw session surely having local traders reaching for Pepto-Bismol or other medication used to battle nausea. After opening with another collapse that saw the Shanghai Composite shed an additional 5% of its value, buying interest emerged and the index managed to pull off its earlier lows to recoup its initial losses; however, the follow-through demand faded late in the session, with the index remaining under pressure to close lower by 1.7%. Whether or not the support for Chinese stocks was driven by government intervention to halt the cataclysmic sell-off equities have experienced as of late is not certain, though it is likely periods of heightened volatility are not set to dissipate anytime soon. The absence of another wash-out to the magnitude witnessed on Monday in China has allowed global equities to disengage from price action in Asia, where European equities are well positioned in the green midway through their session, while US equity futures look to make a strong comeback from yesterday’s pessimistic close on Wall Street. The dollar-linked index is managing to claw back some of the losses witnessed yesterday, though the bulk of those gains come against the euro and yen as the commodity-linked currencies are all pushing higher against the greenback ahead of the opening bell.
One of the majors performing well against the big dollar this morning is the British pound, generating buying interest after GDP figures for the second quarter came out in-line with expectations. The improving quarterly GDP figures showed a 0.7% increase from the 0.4% registered in the first quarter, translating to an annualized reading of 2.6% and giving Sterling bulls further ammo that the Bank of England will be getting more comfortable with the prospects of normalizing monetary policy sometime in early 2016. While it is expected a few of the hawks on the Monetary Policy Committee are likely to dissent in favour of rate hikes at upcoming meetings, the hawks are still in the minority, with the rest of the MPC likely needing to see constructive inflationary signals before advocating for an interest rate hike. The early knee-jerk reaction higher in GBPUSD to the news of the GDP figures has started to fade, though the pound still remains well bid against the dollar heading into the North American open, and attention now focuses on Wednesday’sFOMC rate statement, and broad price action of the greenback.
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