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Exchange4free Global Forex Report (04/07/2018)

USD

The U.S Dollar edged higher during Monday’s session as analysts and investors raise their bets that the rising trade tensions will hurt this economic giant the least. Strategists from BNP Paribas say that the US Dollar is benefitting from from the increased trade tensions as the relative economic impact of tariff measures comes into focus, with the US economy better insulated than the rest of the G10.

On the data front, the US has released mixed economic data, which paints a mixed future economic activity outlook. Factory orders rose by 0.4% in May, while May durable goods orders declined by 0.4% compared to a 0.6% in April. The Dollar has gained some strength due to political uncertainty in the United Kingdom and in the Eurozone. U.S markets close today for Independence Day and analysts will be waiting to see what the market does when it reopens tomorrow morning. Currently the EUR/USD currency pair is trading around 1.1676, up almost 0.13% from Monday.

EUR

During Monday’s session the Euro pared some of its losses against the U.S Dollar as political tensions in Germany give way to an agreement reached between parties. The political news left the EUR/USD pair trading around 1.16612.

German Chancellor, Angela Merkel, reached an agreement with political allies on Monday with regards to migration. The agreement prevented political rupture amongst her conservative bloc. Analysts speculate that political uncertainty and mixed economic data have been the reasons for the 3% fall in the Euro during this year.

On the release front, investors and analysts will be looking towards the German and Eurozone Services PMI data release later today. Indicators from previous months have shown a downward trend, as both PMI’s dropped for six consecutive months. The trend raises concerns amongst investors about the economic strength of the Eurozone. The recent trade tensions are threatening to hamper the Eurozone’s export sector, which in turn could hamper the manufacturing output. Currently the EUR/USD currency pair is trading around 1.1676, up almost 0.13% from Monday.

GBP

The Pound Sterling rose against the US Dollar and Euro during Tuesday’s session on the back of the latest IHS Markit PMI. The latest data showed that the United Kingdom’s construction industry turning a corner in June, with the index activity rising at its fastest pace for eight months.

The IHS Markit Construction PMI rose above expectations of 52.6, and came in at 53.1 up from 52.5 from May 2018. The better-than-expected data shows a positive outlook forward, as both residential and commercial constructions sectors showed a notable upturn in activity. Business optimism about the future is also seeing a recovery, supported by an increase in infrastructure projects, which is a key growth source for the sector. The Sterling was trading around 1.3188 against the US Dollar, up 0.37% after the release of the PMI data. The PMI data is important to investors and analysts,a s it points to the momentum of the economy and the direction of the Sterling. Currently the GBP/USD currency pair is trading around 1.3214, up 0.19% from Tuesday.

AUD

The Australian Dollar rose to the top of the board during Tuesday’s session after the Reserve Bank of Australia (RBA) signalled improving confidence in the outlook for wage growth. This left the AUD/USD currency pair trading around 0.7360.

During Tuesday’s announcement, the RBA kept their interest unchanged at a record low of 1.5%, but caused an upbeat tone in the market and economy. The RBA has held their interest rates the same for the past 2 years, saying that their debt laden households cannot handle an increase. But analysts at RBA say that GDP growth remains within targets and that the increase in commodity prices have provided a boost for national income.

Analysts have noted that the rate of wages growth appears to have troughed and there are increasing reports of skill shortages in some areas, suggesting that there is growing confidence that wages will eventually pick up and interest rates could be raised. The Australian central bank also removed a warning that a stronger Australian Dollar would be a drag on growth and inflation. The removal of the warning is an indication that the RBA is happy and comfortable with the current level of the currency. Currently the AUD/USD currency pair is trading around 0.7412, which is within the expected regions from the RBA.

CHF

On Monday, we saw the Swiss Franc fall against the dollar as the Federal Statistical Office released that Switzerland’s real retail sales unexpectedly fell by 0.1% year-on-year in May. The expectation was that sales would rise by 1.4%.

However, over the past 24 hours, the Swiss franc increased 0.14% against the US dollar, closing at 0.9921 yesterday. The currency pair is currently trading at around 0.9910 at the time of writing. The first level of support is expected to be at 0.9896 with the second level at 0.9880. On the other side, the first level of resistance is expected to be at 0.9939 and the second level at 0.9966.

Without any local economic data being released out of Switzerland today, investors will be keeping an eye out on global economic data for indications on the direction of the currency.

ZAR

The South-African Rand remained under pressure during Tuesday’s session and was heading to its weakest level this year on the back of a stronger dollar. The USD/ZAR was trading around 13.885, 0.4% weaker than Monday.

Investors and analysts speculate that the escalating trade tensions between the U.S and its trade allies, will affect the world’s biggest economy the least. These speculations have boosted the dollar and tightened financial conditions globally.

Locally the Rand has been affected negatively by weak data, which has cast doubt on president Cyril Rhamaposa’s ability to kick-start growth after a decade of stagnation. Furthermore, consumers will see another petrol price hike at midnight tonight, but that is not the only place consumers in South-Africa will be hit, as an increase in fuel prices lead to an increase in food prices and an increase in inflation. The rising prices in South-Africa leads to more downward pressure on the South-African Rand. Currently the USD/ZAR currency pair is trading around 13.67 and the GBP/ZAR currency pair is trading around 18.054.

NGN

During Monday’s session the Niara remained stable against the US Dollar and was trading at 360 on the parallel market. The Nigerian currency had been trading at 360 against the US Dollar for the past four days, while the Sterling and Euro were trading around 486 and 420 respectively. No big economic data has been released in the region and analysts will be keeping an eye on global economic changes to influence the Niara.

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