As the dust settles the blame game begins.

Whose fault is it?
As calm was restored across global equity markets following a tumultuous week the question of who is to blame has begun. Officials in China have said it wasn't their fault, and immediately pointed at the US Federal Reserve, claiming they started it, (classic playground stuff!) Do they have a point though? It’s a long shot but they claim  the devaluation of the Yuan was a reaction to the possibility of a forthcoming interest rate rise in the US with suggestions the Fed are trying to move too quickly and should allow more time for emerging markets to prepare. They're own timing wasn't great though, devaluing their currency so soon after poor trade data which is the most likely reason for the initial panic. Perhaps we will see more cautious intervention from the Chinese moving forward.

Regardless of who started it the encouraging news is that calm has been restored. The FTSE closed 3.6% higher at 6,192 with similar gains for European stocks. Although this move was well under way in the morning session investors were spurred on in the afternoon with the release of the US preliminary GDP figure for the 2nd quarter showing 3.7% growth, a figure well ahead of the market expectation and a significant improvement over the Q1 figure of 2.3%. The improvement has been aided by gains in employment, a rise in house prices and low energy costs helping households across the US. 

September interest rate rise? 
So now surely the Federal Reserve will have to go ahead with an interest rate rise in September, right? And if they do then China will have to react, and oh no, not again... Not so fast; this eventful week has been a stark reminder of how fragile the global economy remains and offers the Fed a get out clause. The market perception seems to be a rate rise is still coming but it wouldn't hurt to leave it just a little longer for everyone to draw breath.

Expectations of an interest rate rise in the UK have also been pushed back once more with some suggesting Autumn 2016 might be more appropriate, slightly different to Bank of England's Governor Mark Carney's recent comments hinting of a move at the turn of the year (2015/2016). We don't have to wait long to hear his renewed views though as he is due to take part in a panel discussion tonight at the US Jackson Hole symposium. Prepare for a masterclass in question dodging.

US Dollar claws back 
Although interest rate rises may be delayed the perceived gap between a move by the US vs the UK has widened which has allowed the US Dollar to claw back nearly 4 whole cents against the Pound (taking GBPUSD to a morning low of 1.54) and 3 cents against the Euro since Tuesday. The Euro gave up a cent to the Pound but a further recovery has stalled for the moment. 

Going in to the UK ‘summer’ bank holiday it is worth keeping an eye on the comments coming from the Jackson Hole Economic Symposium in the US briefly mentioned above.  Central bankers, finance ministers, academics, and financial market participants from around the world will be in attendance and although the meetings are closed to the press, officials usually talk with reporters throughout the day. The market could well react to comments and speeches from central bankers and other influential officials especially given the heightened sensitivity seen this week. 

Look at that, 3 days in a row, no mention of Greece…