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Exchange4free Global Forex Report (07/06/2017)

USD

The Dollar fell yesterday and is now at levels last seen in early October 2016.

The Dollar has retraced more than 60% of its gains since highs in December 2016.

The political situation is one to keep an eye on, as President Trump distanced the US from the Paris Accord on climate change earlier in the week. Trumps move did not pose well with much of the global market.

EUR

The Euro has seen a strong rally in recent weeks against the Dollar, Sterling and other major currencies as markets anticipate a change in attitude from the European Central Bank (ECB) at tomorrow’s meeting. 
Analysts are expecting risks to growth to remain balanced; but the ECB to state that inflation hasn’t showed the improvement that they were hoping for. Meanwhile, they are expected to maintain their current bond repurchase program.

The ECB will also take into consideration the UK election tomorrow and the current political rift between Qatar and other countries in the Middle East.

GBP

The UK has been shocked over the past few weeks and put on high alert after recent terror attacks, including those this past weekend.

While the Sterling has lost some ground against the Euro, much of this is to do with the upcoming election tomorrow.

Current polls show that Theresa May’s Conservative Party is still favoured as the majority winner, while Jeremy Corbyn’s Labour Party has gained some votes.

Less of a majority win for the Conservatives will most likely lead to a weaker GBP/EUR; this as a new UK government may have to be formed with other parties having a greater say and different views to that of May’s stance on Brexit.

AUD

The Australian Dollar is climbing on the back of a better-than-expected Australia first quarter annualised GDP figure.

The AUD/USD rose to 0.7533; the highest level since May 3.

The GDP beat estimates of 1.6% although the actual print still shows a slowdown from the previous quarter. The GDP rose 0.3% quarter on quarter as expected.

CHF

The Swiss Franc continues to appreciate against the likes of the Dollar and Pound.

The Swiss National Bank has stated that it remains committed to preventing Franc appreciation, through intervention if necessary.

Markets are also more optimistic surrounding the global growth outlook; while an underlying process towards global monetary policy normalisation is continuing. The hope is that this will erode support for the Franc in the coming months.

Tomorrow there will be Swiss unemployment rate and May CPI.

ZAR

Yesterday saw the release of South Africa’s GDP results for Q1’17 coming in worse than expected. The result showed the economy contracting by -0.7% q/q, however the annual GDP figure rose by 1%.

This means is that South Africa has entered a technical recession for the second time in 8 years, defined by 2 quarters of consecutive negative growth.

Another contraction in GDP may be expected for Q2’17 leading to further downside risk in the current growth forecasts for this year. In turn, this could lead to ratings agencies and the South African Reserve Bank adjusting their growth forecasts too.

Despite the news above, the Rand has not experienced any dramatic losses which is partly due to a weaker US Dollar.

NGN

Nigeria's Central Bank (CBN) introduced a new spread limit on interbank transactions on Monday, along with a few other new regulations, in an attempt to boost liquidity in the currency market.

The announcement states that all interbank transactions will be subject to a maximum spread of 1 Naira. The new rules are effective immediately. A year ago, the bank had said the Naira would trade with no pre-determined spreads.

The CBN has tried to narrow gap between official and street rates and drive a single –market currency. Previous attempts included pumping Dollars into the market since February this year.

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