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Exchange4free Global Forex Report (11/07/2018)

USD

This past week we’ve seen the US dollar strengthening against all majors except the sterling and AUD. We’ve seen the euro being threatened to falling below its 1.17 handle again against the US dollar. EURUSD is currently trading at around 1.1735 at the time of writing.

Last Friday, we saw both China and the US refusing to back down from their ongoing trade war which resulted in a downside market sentiment this Wednesday, as the US put forward further tariffs on China, steering towards an additional USD 200 billion on Chinese goods.

Investors will be keeping an eye on the US consumer price index (CPI) which is being released tomorrow. The expectation is that the core CPI will remain constant at 0.2% for June.

EUR

During Tuesday’s session the EUR/USD currency pair posted some losses and was left trading around 1.1719, down almost 0.28% on the day. Analyst say that the dip in Euro was mainly caused by disappointing data from the Eurozone. German ZEW Economic Sentiment dropped to -24.7points, a much sharper drop than the expected -17.9 points. Eurozone ZEW Economic Sentiment dropped to -18.7 points, compared to an expectation of -13.2 points.

The economic outlook for the Eurozone appears cloudy, according to the latest ZEW Economic Sentiment indicators. Both German and Eurozone releases have dropped to their lowest since August 2012. These indicators show that markets players and analysts are concerned over the economic outlook. Internal divisions over migrations and fears of a global trade war have investors and speculators worried that the Eurozone might be heading towards significant headwinds, which could send the Euro spiraling downwards.

Later today, investors will keep a close watch on the European Central Bank president, Mario Draghi’s speech. The ECB’s speech will give investors an indication as to where the Euro might be heading and what the economic status of the Eurozone is.

GBP

Despite the shock of a multiple ministerial resignation following the announcement of the Prime Minister’s new Brexit plan, the Sterling held its ground. During today’s session the GBP/EUR pair was seen trading around 1.13, after dropping to 1.1232 in the wake of the news that the Foreign Secretary Boris Johnson was resigning from the cabinet.

Analysts believe that there is an attitude of wait-and-see being adopted in the market as Prime Minister Theresa May rebuilds her top team. What matters for the pound now, is whether Theresa May stays on, as her leadership points to certainty in the market, both in terms of domestic politics and Brexit outcomes.

Looking ahead, the response of the European Union to the UK government’s White Paper on the future trading relationship is to be released on Thursday and will be the next major test for the Pound Sterling. The rejection of the White Paper by the EU will have a negative effect on the sterling and will send May back to square one. At the time of writing, the GBP/EUR is trading around 1.13135.

AUD

The Australian Dollar has seen upsides over the past week, as the AUD/USD currency pair have been posting gains. Analysts say that the main reason for the rise in the currency pair is the perception of a fading trade war risk.

Analysts and market speculators expect the recovery to extend further, up to 0.7550 over coming days as markets expect trade tensions between the United States and its trading partners to ease. The Australian Dollar does have a dark cloud looming over its head, as Australia has comparatively low interest rates compared to the U.S. The problem with this, is that currencies with higher interest rates generally outperform those with lower rates, as foreign investors prefer to get a higher return on investment. The United States plan on hiking interest rates at least twice more this year, whereas Australia only plans on hiking interest rates early next year.

CHF

The State Secretariat for Economic Affairs (SECO) revealed on Monday that Switzerland’s unemployment rate for June fell to a seasonally adjusted 2.6% for June from May’s 2.7%. This is however, above the expectation of 2.3%. The data indicated the unemployed for June dropped to a total of 106,579, dropping by 2,813 from May.

Yesterday, the US dollar strengthened by 0.07% against the Swiss Franc closing at 0.9923 and is currently trading at around 0.993 at the time of writing. There are no local economic releases for Switzerland today so investors will be looking for global macro-economic releases to determine further direction.

ZAR

The Rand’s comeback against the Dollar this month is expected to run out of steam, as U.S rates rise and the trade war between the world’s two biggest economies present a burden to emerging markets.

The Rand gained almost 2.2% against the Dollar from the end of June, but analyst believe that the gains are about to run out. The Rand has lost some ground against the Dollar from the start of the week as wage negotiations between Eskom, South-African Energy supplier, and its workers continue, without an end in sight. Markets are nervous regarding these tensions, as workers are threatening to strike, which could cause power outages across the country, directly impacting businesses and the economy. Data released in the region did not help the situation either, as the SACCI business confidence nudged lower to 93.7 in June, down from 94 in May. The index has decreased for the fifth consecutive month, casting a shadow on the extent of an economic recovery in the second quarter.

With no major data releases in the region, analysts and investors will keep an eye on Brexit negotiations and trade tensions between the US and its trading partners for indications on the position of the Rand. At the time of writing the USD/ZAR pair is trading around 13.50.

NGN

The Naira opened trading marginally stronger against the USD as last night the Naira had appreciated to 361.91 against the Dollar (from 362) due to a 30% increase in the volume of dollars being traded in the country (up to $138.80 million from $106.46 million traded on Monday).

In the parallel market, the Naira strengthened to 358 per USD (from 358.50).

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