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Exchange4free Global Forex Report (05/07/2017)

USD

The first half of 2017 has seen the USD as the worst performing G10 currency.

The soft performance of the USD can be linked to several factors; a decreased expectation for US fiscal reform, a string of disappointing US data, and increasing skepticism of a third rate hike this year.

All eyes will be on the Federal Open Market Committee (FOMC) minutes released later this evening (19:00 GMT +1). The focus will most likely lie on the Fed’s plans for reducing the massive balance sheet.

EUR

The Euro came off yearly highs on Friday, powering onto its best quarter in nearly 7 years.

The Euro’s rise started with the rejection of nationalist anti-eurozone presidential candidates in France, Austria and the Netherlands in April and May this year. There was an increase in momentum when European Central Bank (ECB) chief Mario Draghi said that the Eurozone is headed towards ‘reflation’. These remarks suggest that the central bank’s monetary policy could become less accommodating from next year, which increased the interest in euro- denominated assets.

According to money markets, there is an 80 percent chance that the ECB will hike rates over the coming year.

GBP

The Sterling lost some of its recent momentum on Monday after a survey released showed that the Markit UK manufacturing Purchasing Managers Interest (PMI) dropped to a three month low of 54.30. May’s final reading was also revised down to 56.30. The Sterling was not helped by UK construction PMI or Services PMI either, as both came in lower than expected.

The combination of disappointing results early this week, indicate that the UK economy might not be in a good enough position to start looking at interest rate hikes.

AUD

The Reserve Bank of Australia (RBA) kept interest rates constant at 1.5% yesterday. The Aussie Dollar had strengthened before the meeting with the expectation that the RBA would follow the trend of global counterparts and tighten their monetary policy. As a result, the Aussie Dollar took a dip after the announcement.

RBA Governor Philip Lowe stated that the reason for not taking a more hawkish approach is owed to the concerns of a weak wage growth and high household debt, which would leave consumption vulnerable.

CHF

The Swiss National Bank (SNB) has been focussing on forex intervention in order to avoid the Swiss Franc from appreciating too fast. According to analyst JP Morgan, this extreme intervention is costly and unsustainable in the long term.

As the Franc’s fortune is closely connected to the Eurozone, the SNB would be in favour of the ECB driving the Euro higher which would allow the SNB to lessen their intervention.

ZAR

The Rand has weakened across the board in the past week. This change in direction is partly owed to the rise of interest rates in developed markets such as the UK and Canada.

Strategists at Morgan Stanley are expecting the Pound to strengthen further against the Rand over the short-term.

Economists have noted that most of the fall in the Rand is owed to global economic movements; however the ongoing negative headlines paired with the recession are not helping the county’s situation.

The Producer Price Index (PPI) which was released last Thursday showed an annual change of 4.8% in final manufactured goods. Results indicate a 0.5% increase from an Index of 101.6 in April 2017 to 102.1 in May.

NGN

The Central Bank of Nigeria (CBN) has injected another USD 195 million into various segments of the market, as it continues its drive to ensure liquidity and stability in their foreign exchange market.

The Naira is currently trading around 365 against the USD in the parallel market today.

Exchange4free Global Forex Report (29/06/2017)
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