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Exchange4free Global Forex Report (06/12/17)

USD

The Dollar gained on Tuesday for the second session in a row as the market’s optimism over US tax reform increased. In late trading on Tuesday the Dollar Index moved up towards 93.329, representing a 0.2% increase. While the gains have been a clawback against the two-month low seen last week, analysts are of the opinion that it will be short lived.

The House of Representatives should vote on the proposed tax bill later this week and the Senate the following week. At the moment the positives over possible tax cuts are outweighed by concerns over the debt ceiling. Investors are of the opinion that a final deal between the House of Representatives and Senate could be reached by the end of December 2017.

EUR

According to strategists at the ING group, the Euro is poised for big gains in 2018, as risks of a Eurozone break up subside, and speculations of an interest rate hike emerge.

The European Central Bank is set to reduce the scale of its bond purchase from 60 billion Euros to 30 billion in January, the expectation is that the wind-down program will finish just before September 2018. As soon as Quantitative Easing ends, the market will be able to begin pricing in the possibility of rate hikes.

Data released yesterday showed retail sales for October dropped by 1.1% - the expectation was for a drop in 0.7%. This was followed by a year on year figure of 0.4%. German Services PMI also come in short of expectations at 54.30 (down from 54.9).

GBP

The Pound has been struggling against both the US Dollar and Euro on Tuesday due to ongoing uncertainty surrounding the Brexit deal due to Irish border issues. Poor UK services PMI data released did not help the Sterling.

The Pound woes became evident once it became public that the draft document featured plans to avoid a hard border between Northern Ireland and the Republic of Ireland by allowing Northern Ireland to remain in the EU’s custom union and single market. Northern Irish DUP party demanded equal treatment with the rest of the UK.

AUD

On Monday the Australian Dollar displayed some encouraging signs of a minor rebound as it has been on the decline in recent months. Monday revealed better than expected retail sales, according to the Australian Bureau of Statistics (ABS), coming in at AUS 26.05 billion and representing a 0.5% increase for the month of October 2017. Tuesday saw Australia’s Central Bank leave the interest rate unchanged for the 16th month in a row at 1.5% with further comments that the unchanged rate could assist in supporting their currency in 2018.

However, these gains were short lived as third quarter GDP figures narrowly missed market expectations at 0.7% for the quarter and 2.8% over the past 12 months. Expectations were at 0.8% and 3.0% respectively.

CHF

Analysts at French Investment bank BNP Paribus, expect the Dollar to show significant strength against the Swiss Franc by the end of this year. There are various factors supporting this statement such as the gap between short-term and long-term bond yields and the markets ignorance regarding President Donald Trump’s ability to secure the tax reforms in the near future. Yesterday, the US Dollar increased by 0.28% against the Swiss Franc closing at 0.9873.

November CPI data released today indicated a fall of 0.1% month-on-month, however, rose by 0.7% year-on-year.

ZAR

The ZAR has enjoyed some gains against most of its fellow peers the last couple of days, as markets preferred candidate Cyril Ramaphosa seems to have a real chance at winning the ANC leadership race.

Ramaphosa is viewed as a business-friendly candidate and has been critical of state corruption. His popularity has been a key factor in ZAR strength, and the fact that he won nominations in 5 of 9 provinces, has been reassuring for investors.

In the next couple of weeks we will see the ANC decide the party’s next leader, as President Zuma’s long reign comes to an end. If Ramaphosa wins the ANC leadership he is well poised to become South Africa’s next president. A couple of weeks ago former finance minister Pravin Ghordan stated that he is confident that South Africa will avoid a downgrade should Ramaphosa win the ANC election.

The Rand was also well supported on Tuesday by the release of Q3 GDP results, which showed a 2% rise, beating the expectations of 1.5%.

NGN

The Central Bank of Nigeria (CBN) has weakened the Naira marginally, selling the Dollar at N307 for the first time on the official interbank market. The Naira has had relative stability of late against the Dollar which has impacted positively on price stability of most goods in the market, as the Nigerian economy continues to stabilise and pursue growth.

According to reports the Naira has appreciated by 30.3% since February, when the CBN began its aggressive interventions in the foreign exchange market.

Exchange4free Global Forex Report (22/11/2017)
Exchange4free Global Forex Report (13/12/2017)

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