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Exchange4free Global Forex Report (15/02/2017)

USD

Federal Reserve Chair Janet Yellen stated that the central bank is still planning to gradually increase interest rates throughout the year provided the economy remains stable. The Reserve Bank has noted that increasing the interest rate too rapidly could put a lot of pressure on the economy as the interest rates have been kept low for the past 7 years.

News out of the US yesterday included the resignation of U.S. National Security Adviser Michael Flynn after he stated his concerns over the new administration’s ability to boost growth in the economy.

USDZAR is expected to break the 13.00 level having reached this mark earlier in the trading session.

EUR

The Euro has come under increased pressure over the past week with a lot happening in the Eurozone ranging from Greek bailouts to increasing support and fears over Marine Le Pen’s anti Brussels campaign as French elections approach.

The IMF has been in discussions over the past week what to do regarding Greece’s debt problems. Marine Le Pen’s campaign is particularly worrying as investors fear something similar to Brexit may be in her plans should she gain enough support for the presidency.

The Euro was trending slightly stronger at the time of writing having recovered slightly from lows seen earlier in the week.

GBP

A strong run of the Sterling against the Euro over the past four months came to an end as inflation data out of the UK economy came in below expectations pointing to increased signs of a weakening economy.

It seems as though the Sterling is not quite out of the woods with George Saravelos of Deutsche Bank revealing his forecast of the Sterling during an interview with Bloomberg. During the interview he said the pound could fall to $1.05 against the dollar, effectively falling another 16% after the initial Brexit vote. His view comes due to the increased probability of a complicated Brexit with a fairly short amount of time available to achieve it.

AUD

AUD is on the rise as the Australian economy continues to show increased signs of business confidence after a small flat patch near the end of last year. According to Reuters, the National Australia Bank's monthly survey of more than 400 firms showed its index of business conditions jumped 6 points to +16 in January. That took it back to the highs seen in mid-2007 and well above the long run average of +5.

The economy is also benefiting from increased grain exports as well as rising commodity prices globally which is bolstering the Australian stock market.

CAD

The Canadian Dollar is on the rise again after oil rose earlier in the week. The gains were offset slightly with news out of the US as FED Chair Janet Yellen pointed towards interest rates hikes later in the year. Markets are expecting a 70% probability of a rate hike in June with that probability below 40% with the upcoming meetings prior to June.

Canadian Prime Minister Justin Trudeau met with President Trump in Washington on Monday and the outcome seemed quite positive after initial fears that President Trump would completely change NAFTA, which is the main trade agreement between the two nations. Canada currently sends 75% of its exports to the United States and obviously this agreement plays a major role in their economy. While the agreement won’t completely be changed, minor tweaks to it are expected.

NGN

The problems facing the Naira continue to mount - as the currency hit another record high of 507 against the USD on Tuesday. The GBP/NGN exchange rate also moved - up to 620.

This comes only 2 weeks after the CBN sold USD 660,000,000.00 in 3 and 6 month currency forwards at an auction aimed to clear the backlog of USD demand. It would seem as if this was not enough to satisfy the market which continues to weaken.

ZAR

With the State of the Nation Address out of the way the ZAR has managed to break through key support levels of 13.20 against the USD. The rand is slowly showing gains predominantly coming from a risk-on / Trump-on market. This assisted the rand in a fifth consecutive day of gains reaching the 13.08 mark against the dollar before profit taking begun.

Other market news boosting the rand included the dollar being negatively impacted after President Trump's national security adviser, Michael Flynn, quit and concerns over the new administration’s ability to boost economic growth.

On the local front, CPI data out this morning came in below the expected level at 6.6% year-on-year for January with the expectation at 6.7%. December 2016 was at 6.8% year-on-year pointing towards slowing inflation.

Exchange4free Global Forex Report (08/02/2017)
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