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Exchange4free Global Forex Report (06/09/2017)

USD

Political tension continued to rise between the US and North Korea following the potential for yet another missile test in North Korea this coming weekend. The US has threatened the Peninsula with further sanctions as an alternative to weaponry conflict. It is believed that China currently accounts for approximately 90% of North Korea’s foreign trade, thus providing a vital platform for them to connect with the global economy.

A combination of the above plus the lack of optimistic data out of the US contributed to the Greenback’s fall against most of its major peers. This leaft investors retreating to the Swiss Franc and Japanese Yen. Worse than expected inflation prints as well as a decline in US factory orders left the Dollar retreating to levels of 1.1930 (EUR/USD)

EUR

This week we see a combination of factors affecting Euro appreciation.

The Euro failed to take advantage of less than impressive UK data. The looming ECB interest rate decision contributed to a minor retreat. The expectation is for the central bank to keep rates on hold tomorrow with some of the opinion that they may only hike interest rates in 2019. 
Eurozone services and retail sales also disappointed and further added to the pressure that the euro is facing.

GBP

British manufacturers and retailers are seemingly optimistic at the moment and reporting and increase in sales amid the third round of Brexit negotiations.

On Tuesday, UK retail sales data was released showing an increase of 1.3% when compared against August of the previous year. At the same time, manufacturers have also reported an increase in demand for British manufactured goods from Europe and the rest of the world.

Analyst have warned that the optimism may be short lived with inflation rising in the background and increases in retail sales could largely be offset by this.

Another factor hindering manufacturing orders in the UK is continued uncertainty over Brexit negotiations leading to European business potentially holding back on orders as they eagerly await the outcome of negotiations.

AUD

Australia’s GDP rose for the second quarter of 2017 by 0.8%, quarter on quarter, and up from the first quarter’s GDP of 0.3%. This represents the 26th year of consecutive growth for the economy.

Australia’s Reserve Bank also kept interest rates on hold this week citing stable inflation and capacity for an expansion in their labour market as the main reasons for keeping the rate on hold.

CHF

The Swiss Franc continued to gain ground amidst the aforementioned US North Korea political debacle. The pair (USD/CHF) lost most than 0.25% in past 24 hours and was trading at 0.9540 at the time of writing. Further appreciation could be expected later in the week as North Korea prepares for another missile test.

Later today GDP for the second quarter will be released together with consumer price inflation for August.

ZAR

With the release of 2Q’17 GDP data yesterday from Stats SA, South Africa is officially out of a technical recession. The Rand benefited on the back of the news and extended gains towards the 12.84 (USD/ZAR) mark before retreating to 12.91 this morning.

Together with some Dollar weakness the news came at the perfect time for further gains for the ZAR. The rest of the week seems fairly uneventful with the exception of the ECB meeting tomorrow where rates are expected to be kept on hold.

NGN

On Tuesday news revealed that Nigeria had moved out of a recession with the release of GDP data for the second quarter. An uptick in oil exports significantly contributed to growth in Africa’s largest economy, however analysts have warned that the economy remains in a fragile state. Despite the positive growth in the economy, the figure still missed expectations by coming in a full percentage point lower.

While Nigeria continues to rely on oil exports, the Nigerian Government has stated that growth and investment in agriculture is a way for the economy to wean itself off of this dependence. This despite the fact that growth in the agriculture sector fell from 4.53 percent in 2016 to 3.01 percent in 2017.

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