China key manufacturing survey suggested its economy is faltering

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This week we have seen very weak economic data around the globe, including China, where a key manufacturing survey suggested its economy is faltering. While in the USA the recent approved “Operation Twist” is far from reassuring the markets.

The price of cooper has fallen dramatically losing 7.5% in London trading. Cooper has often been seen as indicative of industrial activity and so these last movements have been interpreted as a slowdown in industrial demand around the world.

The recent commentaries from the World Bank chief Robert Zoellick who described the world economy as a “danger zone” have not helped to calm the markets.

This week was marked by fears of a Greek default and despite the Greek government announcing a new round of austerity measures on Tuesday many investors still believe that the default is inevitable. Data from Germany, Europe's largest economy, showed its services Purchasing Managers Index (PMI) slipped close to contraction at 50.3, while manufacturing, which was booming earlier this year, was flat. In France, services business activity grew at its weakest pace in two years while the manufacturing sector contracted for the second consecutive month.

However, it was not bad news from Europe; the Euro recovered some ground overnight after a statement saying that the G-20 nations ‘are committed to a strong and coordinated response to the challenges facing the global economy’. We also saw the Irish economy bringing a glimmer of hope after new figures revealed that their gross domestic product (GDP) jumped to 1.6% for the second quarter. This figure exceeded the analyst’s expectations and it is a good indicative that the austerity cuts adopted by the Irish government are working. But even more importantly it is an example than not all the “troubled” Eurozone countries will follow the same fate as Greece.

We saw the Sterling-Euro rate dropping from levels above 1.15 at the beginning of the week to 1.14 this morning.

In the UK we saw Sterling takea hit after the UK MPC meeting which voted to leave rates on hold and showed signs of another round of quantitative easing in the agenda. The UK growth for 2011 has also been revised downwards from 1.5% to 1.1%.

The week leaves us with a bitter taste and puts even more pressure on the markets. If you have a currency transaction to make you can protect yourself from rate fluctuations or find out how you can take advantage of sudden exchange rate volatility by speaking to Moneycorp today. The service is free and without obligation or 020 7589 3000

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