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Exchange4free Global Forex Report (02/08/2017)

USD

The US Dollar hit a 15 month low against most major currencies yesterday fueled by political turmoil in Washington and weak economic data, which kept the Federal Reserve’s (Fed) policy outlook uncertain.

Yesterday, US data showed the core Personal Consumption Expenditure (PCE) in June rose by 0.1 percent for the month, and 1.5 percent year for year.

Political uncertainty is expected to continue weighing on the greenback following President Trump’s ouster of White House communications Chief Anthony Scaramucci on Monday.

Markets are also concerned whether or not the Fed will raise interest rates again this year.

Traders bets last reflected a 46 percent chance of a Fed rate hike in December.

Yesterday, the Dollar index, which measures the greenback against a basket of six major currency rivals, was last up 0.2 percent at 93.060 after touching 92.777, the lowest since early May 2016.

EUR

Yesterday we saw the Euro hit a two and a half year high against the Dollar.

It seems as though the Euro is on track to its best year since 2003, when it ended the year up more than 12 percent. We saw the Euro trading just above 1.18 (EUR/USD) yesterday and today, as investors look to move away from the risks surrounding the Euro zone and focus on stronger fundamentals driving growth in the region.

Traders predict that with the Euro still undervalued, a currency move towards 1.20 in the short term and above 1.30 in the long term can be seen. This is very likely if we see the European Central Bank (ECB) start to consider a rate hike later this year, or if the Fed slows down their rate hiking cycle.

GBP

The Pound has surged to a 10-month high against the US Dollar. Markets reacted to the latest political movements in the US. The Pound also gained strength from manufacturing PMI, which revealed that activity in Britain’s factories rose last month.

There is pressure on the Bank of England (BOE) to raise the rates before Brexit. The BOE will update its own economic estimates on Thursday and economists say the central bank will probably revise down growth forecast for the next two years and keep the inflation outlook unchanged. Currently the BOE projects inflation at 2.8 percent this year and 2.4 percent in 2018.

AUD

The Australian Dollar weakened overnight, undermined by the rare bout of the US Dollar strength, a modest pullback in commodity prices and renewed concern from the Reserve Bank of Australis (RBA) over its recent push higher.

The biggest influence of the AUD was a rebound in the US Dollar, something that came despite broadly weakish US economic data and falling US bond yields.

CHF

The Swiss Franc dropped 4 percent in one week. The Swiss National Bank (SNB) has been working hard to bring down the value of the Swiss Franc. The SNB President described the currency as “significantly overvalued”.

The currencies downward slide was triggered by many factors including an excess of Francs in the system. The SNB has been adding assets to its balance sheet for some time, putting more Francs into the market.

There are expectations that the Franc could fall further to 1.14 in six months and 1.16 within 12 months.

ZAR

South Africa’s Rand extended its losses against the Dollar and other major currencies on Tuesday,. This, after a warning by Moody’s about political interference in the country’s economic policy reignited fears about downgrades of credit ratings.

The weak and falling Rand is a result of elevated credit rating fears. In a recent report from Moody’s, points of concern included ongoing structural growth concerns and South Africa’s Reserve Bank independence worries.

NGN

Last week we saw the Central Bank of Nigeria (CBN) inject USD 657.33 million into the foreign exchange market. This made the value of the Naira gain strength at both the parallel and Bureau de Change by 0.8 percent.

We saw the value of the Naira appreciate from NGN 363 on the Monday to NGN 360 by the close of business on Friday.

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