Market Overview

Concerns over the slowdown in the Chinese economy dominated the global markets this week. The Chinese manufacturing and services purchasing managers' indexes fell in December, while China's central bank devaluated the yuan. All that led to market turbulences this week. The global markets seemed to stabilise today as the China Securities Regulatory Commission announced on Thursday that it suspended circuit-breaker rules. The circuit-breaker rules intended to stop free-falling share prices and to calm markets.

China's securities regulator on Thursday also announced new rules to restrict selling by big shareholders. Big shareholders can't sell more than 1% of a listed company's share capital every three months, and they have to disclose their plans 15 days in advance.

Meanwhile, the People's Bank of China (PBoC) added 200 billion yuan to the financial system this week.

It's likely that the global markets will be volatile in the coming weeks as concerns over the slowdown in the Chinese economy will remain in focus.

Geopolitical tension in the Middle East also added to the volatility in the markets. Saudi Arabia, Bahrain and Sudan government had broken off diplomatic ties with Iran. The United Arab Emirates said that it would downgrade its diplomatic team in Iran. The situation escalated after Saudi Arabia executed a Shia Muslim cleric.

Regarding the U.S. economic data, the situation remained unchanged. The labour market continues to strengthen, but the manufacturing sector remains weak.

According to the U.S. Labour Department's data on Friday, the U.S. economy added 292,000 jobs in December, exceeding expectations for a rise of 200,000 jobs, after a gain of 252,000 jobs in November. The U.S. unemployment rate remained unchanged at 5.0% in December, in line with expectations.

Will be the strong U.S. labour market data enough to hike interest rates in the U.S. further? Inflation in the U.S. remain very low as oil prices continue to decline. The slowdown in the Chinese economy is likely to weigh on the U.S. economy.

It is likely that the currency pair EURUSD will rise toward the resistance level at $1.1000 or at $1.1100, if the U.S. economic data will be negative or there will be negative news from China and no negative news from the Eurozone.

If the U.S. economic data will be positive and in case of the negative news from the Eurozone, the currency pair EURUSD may test the level at 1.0800 or the level at $1.0700.