Is the Brexit impact to the economy a myth?

August 17, 2016

The British pound shows signs of a rebound as the greenback loses its footing while the consumer and producer inflation data alleviated the investors’ concerns about Brexit fallout.

The rally on the Pound ran out of steam nearly around 1.30 level, after the UK Statistics Bureau released the inflation gauges for July, indicating that there are upbeat shifts in the Britain’s economy the first time after Brexit. The CPI rose by 0.6% beating the 0.5% forecast, while less volatile Core Consumer Inflation index posted a 1.3% growth trailing below the forecasts. The Producer Price index (n.s.a) showed the result of 4.3% in the annual change exceeding the expectations. Overall, the new data soothed the worries about the adverse impact of Brexit on the UKs economy.

Investors are globally increasingly damping bullish wagers on the US Dollar as the probability of rate a hike wages, boosting the appeal of the emerging market assets. Futures on the greenback dived by 1.04% on Tuesday with the EUR/USD pair rising by 1% to a 1.13 level, the GBP/USD +0.89% at 1.2995. The USD/JPY fell below a 100 on the excessive dollar softening, which is a first time since the Brexit spike. The Australian Dollar gained 0.77% rising along the commodity markets.

The Russian RTS climbed to a one-year peak at 980.72 points, gaining 0.88% on Tuesday, while the Japanese shares plunged together with the Asian stock index MSCI, which was retreating from the highs. The equities tumbled in the developed markets with DAX declining by 0.58% to 10.676,50 and the FTSE 100 losing 0.29% as the pound pares down declines. The Chinese stocks recede from a seven-month high on Tuesdays close. Shares in the financial sector performed horribly and the real estate sector shares are making up for recent declines. The CSI300 index, embracing the largest companies of Shanghai and Shenzhen together with Shanghai Composite Index of Shanghai Stock Exchange lost 0.5 percent.

The anticipation for a new stimulus measure fueled a recent rally with the Chinese equities. This was dashed by a senior official of the central bank, assuring that the Chinese banks operate with sufficient liquidity while the interest rates probably reached a lower bound. Shares of the banking sector fell by 2 per cent during a profit-taking by the investors after a sharp rise in the previous session. At the same time, shares of real estate companies continue to rise– the index of  the sector rose by 3.2 percent to a new seven-month high.

The Russian ruble advanced by 0.51% to a 63.71 level on the Dollar weakness and the  Oil gains.

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