What poses grave threat to global economy?

As analysts expected, the US dollar is steadily advancing against its rivals. Meanwhile, the pound sterling is losing ground amid thin volumes in Europe with London markets shut for a public holiday today. Besides, the US Fed Chair dropped some cautious hints about a rate hike in the short run that pushed the pound down. Aleksander Davydov comments: The pound sterling posted minor losses on the wake of US Fed Chair Yellen’s speech. However, the US economy is slowing down a pace of growth. In contrast, the UK economy is getting into gear that has been proved by the recent GDP data. The robust data from the UK will weigh down the US dollar. Besides, the weaker yuan is also putting pressure on the greenback. Thus, the British pound is expected to retrace to 1.3150. End of comments Nowadays, currency strategists are leaning to the viewpoint that the pound’s weakness is not caused by the UK’s decision to leave the European Union. After the Brexit vote, the UK’s economy has proved its solid performance. The pound had been under pressure earlier this month on expectations that the Bank of England might ease monetary policy further in coming months. So, investors realize the monetary policy differentials in the US and UK. The US regulator signals that interest rates could be lifted as soon as next month. On the other hand, the Bank of England cut the key interest rate to a record low. While traders are overreacting to the UK’s historical decision to exit from the EU, China’s monetary authorities are taking measures to weaken the yuan against both the dollar and a trade-weighted basket of currencies. This has not triggered global panic yet. On June 23, the day of the UK’s referendum vote, Chinese officials quietly fostered a 1% drop in the yuan’s value against the dollar. In the past 12 months, the yuan has fallen 4% against the US dollar. Apart from the measures by the People’s Bank of China, the weaker yuan obscures a bigger problem. The yuan’s devaluation indicates a slowdown in China’s economic growth. This could entail a decline in the global economic growth. Today, the dollar/yuan pair is trading next to 6.6815. Experts say that the current economic situation in the second-largest economy might trigger deflation across Asia. Indeed, slow consumer inflation in China contributes to lower producer prices in the whole region. So what is a greater threat to the global economy: Brexit or the yuan devaluation? https://www.instaforex.com