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Exchange4free Global Forex Report (08/02/2017)

USD:

Fed Reserve Bank President of Philadelphia Patrick Harker, suggested that there is a possibility of a rate hike in March if GDP keeps growing and the labour market continues strengthening (Last Friday, data released showed that jobs added to non-farm payrolls soared to 227,000.00). However, treasury yields did not respond to Harker’s comments. All in all, investors feel that the mixed data released on Friday, could potentially delay the Fed’s next hike (in contrast to the non-farm payrolls - average hour earnings saw a disappointing increase of 0.1%, versus an expectation of 0.2%).

EUR:

Political risk makes the headlines once more in European markets, as France’s far right wing presidential hopeful Le Pen seems to be gaining popularity rapidly. A recent poll conducted shows that Marine Le Pen is likely to win the first round of polls, however, it is hard to imagine that she would receive many votes outside of her core following for the second round of elections, due to her political stance. Le Pen has threatened to push for a ‘Frexit’ should she win the election.

This, alongside the tension between Trump and Merkl, and the widening rift between the IMF and the EU (the IMF reports that the Greek bailout plan is simply unsustainable - the EU denies these claims), sees the Euro uncertainty persist in the near term.

GBP:

The British pound recovered some of its recent losses, on the back of some comments from MPC member Kirstin Forbes as she pushes for a rate hike from the BoE. Forbes believes that the impact of uncertainty caused by the Brexit has been exaggerated and that a massive slowdown from the Brexit might never come. At the time of writing, the GBP/USD mid-market rate is within touching distance of 1.25.

AUD:

AUD gains seem limited against major currencies, as the AUD/USD pair currently finds itself trading sideways. Unless the AUD can somehow break 0.77 in the next day or two, the short term bias will be tilted towards the downside.

In the early hours of Tuesday morning, the Reserve Bank of Australia (RBA) announced its monetary policy decision. The RBA kept interest rate at 1.5%.

CAD:

Data released on the 31st of January showed that the Gross Domestic Product (GDP) for November 2016 exceeded expectations reaching +0.4% as opposed to the 0.3% expected. While this is positive feedback for the Canadian Dollar, the sharply falling price of crude oil has kept the CAD under pressure since Monday. As a result the Canadian dollar closed at its lowest in over 2 weeks against the US dollar yesterday. Furthermore, Trump’s expected re-negotiations regarding the North American Free Trade Agreement (NAFTA), keeps the possibility of an interest rate cut by the Bank of Canada.

NGN:

The Nigerian Naira hit a record low of 500 against the USD on the parallel market earlier this week, but has since somewhat recovered. The general consensus seems to be that the reason for Naira weakness against the Dollar is largely due to the fact that the rationed dollar supply on offer by the CBN, is simply not enough.

ZAR:

With the state of the Nation Address coming up, the ZAR failed to break through the resistance level of 13.20 against the USD, despite coming within touching distance. On the other end of the spectrum, 13.60 can be seen as a key level.

Rumours of a cabinet reshuffle were a key factor for investors to consider, as Zuma indicated that “Treasury is standing in the way of reform”, however, President Zuma did go on record yesterday to assure investors that a cabinet reshuffle is not on the cards.

Therefore, we can expect Finance Minister P. Gordhan to hold on to his post, at least for now.

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