Financial Wobble Starts 2016

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When the stock markets opened on Monday no one was really expecting the rocky start to the New Year that we got. It is not just one thing that was causing the chaos but an accumulation of poor figures from China, tension in the Middle East and the suspension of the Chinese stock market. When things like this happen obviously people want to sell the worst affected currencies and put their money into safe havens. The most traditional of the safe havens is of course the Swiss franc.

The Chinese stock market was suspended after a 7% crash in value over night.

The thing about currency safe havens such as the Swiss franc are that there is a bit like seesaws. As people sell the currency they don’t want to buy the Swiss franc the value of the Swiss franc goes up the value of the unwanted currencies drops the so one end of the seesaw rises as the other falls. The same happens with gold, the gold price has gone up for about the first time in a year; it lost 10% last year. Seesaws by their very nature don’t just stay with one end stuck up in the air it has to come down. As soon as the first big institutional investors feels it safe to go back into the market and they start to sell their stock of Swiss francs. People see the price start to drop because of the sale and they all want to sell their francs before they lose money on the deal. That starts the rush so the seesaw drops and the money that  is now flowing into other currencies or commodities causes those rise. That is the very nature of currency trading and why is a high risk business.

One of the spin-offs of all this is that we now have a more valuable Euro. This is not good if you’re booking a skiing holiday as everything is going to cost you more is good news for the the European countries dependent on the tourist industry especially skiing regions as the poor snow forward seen so far this year is causing them some concern and a weak euro would have meant that the bookies they had would have them less money. What we are likely to see later in the year is better than expected tourism figures for the first part of 2016 this will be seen as economic good news for the Euro which will boost its value further. This rather presumptuous to make a prediction based upon just four days but I will not be surprised to see the euro gaining value in about three months time when trading figures are released. Mind you I’m no financial expert.

Posted by Peter Rudin-Burgess

Peter Rudin-Burgess

Peter is one of the founding partners for both Compare Holiday Money and Currency Buy Back. He regularly blogs on financial matters and writes content for a number of blogs in the travel industry.

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