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Exchange4free Global Forex Report (16/05/2018)

USD

The Dollar held firm near a five-month high this morning, which was brought on by gains in long-term US Treasury yields, while the Euro shrugged off reports that a possible future Italian government would seek debt forgiveness from the European Central Bank. The US Dollar has shown some significant gains since mid-April and clawed back most of its 2018 losses after the monetary policy reassessment.

Investors have been able to turn their focus to the gains in the US yields, as China and the US move towards negotiations that would avoid a full-blown trade war. The Dollar strength was also fueled by positive US Retails Sales data, where April sales grew by 0.3%, which was well within the expected targets.The positive data is likely to fuel further interest rate hikes as data has shown steadily increasing inflation in the US.

Sanctions against Iran, have caused a surge in oil prices and analysts warn that further upward trend in oil prices can be expected. Looking forward, markets will be looking at US industrial and manufacturing data, which can impact the US Dollar negatively if it does not reach expectations. Currently the EUR/USD currency pair is trading in the region of 1.18452, compared to 1.1927 on Tuesday.

EUR

During Tuesday’s session, the EUR/USD currency pair remained almost unchanged and was trading in the region of 1.1927. The pair remained unchanged as the German Preliminary GDP came in at 0.3%, very close to the forecasted 0.4%, where as the Eurozone GDP came in at 0.4%, matching the forecasted growth percentage.

The first quarter Eurozone and German GDP data were within expectational regions, however analyst warn that investors should not become comfortable, as the data points to a possible slowdown in the Eurozone economy. Analyst do not have an optimistic outlook for the second quarter and markets are bracing themselves for softer CPI data to be released later today. Currently the EUR/USD pair is trading around 1.18452, compared to 1.1927 on Tuesday.

GBP

The Sterling outperformed the majority of major currencies during Tuesday’s session, on the back of strong employment data in the UK. The highly anticipated employment and wage data showed that the UK will continue to deliver higher pay rates, despite the economy suffering a slow down at the start of 2018. The data left the GBP/USD pair trading around 1.3479.

According to the data released, the unemployment rate remained at 4.2%, just as markets have forecasted. Wages remained within expectations, and showed a 2.9% increase. The data suggests employment dynamics continue to head in a direction in line with the Bank of England’s expectations and forecasts, which in turn keeps alive the possibility of an interest rate hike. Currently the GBP/USD currency pair is trading around 1.35103, up 0.23% since Tuesday.

AUD

The Australian Dollar fell against the US Dollar on Tuesday, as US bond yields soared to fresh multi-year peaks. The new highs in the US yields left the AUD/USD currency pair trading around 0.7471, down 0.72% on the day.

The broader moves across all major currencies Tuesday, have been dictated by the bond markets with yields in US reaching a high of 3.09%. Australian wage data was softer than expected, which did not help the position of the Australian Dollar. Australian wages grew by 0.5%, below the estimated 0.6%. With data weaker than expected, a year-end rate hike is looking less likely. Analysts and investors will be keeping an eye on coming events and data released in the region, for it can have a significant impact on the Australian dollar. Currently the AUD/USD currency pair is trading around 0.7485, up 0.18% since Tuesday.

CHF

The Swiss National Bank revealed earlier this week that they have no immediate intentions of changing their monetary policy. The Swiss Franc has weakened in recent months against major pairs but still remains highly valued according to Fritz Zurbruegg, Vice Chairman of the Swiss National Bank. He further affirmed that there is no reason to abandon their negative interest rate policy at the moment. The vice chairman also stated that while there is currently less demand for the Franc, the situation could change quickly and that the Franc remains in a fragile state. 


ZAR

During Tuesday’s session the South-African Rand dropped more than 2% after US retail sales showed a rise of 0.3% during the month of April. The positive data has further boosted USD gains against its peers and left the USD/ZAR pair trading around 12.60. US bonds surged to new highs, which only added to the increased volatility of the Rand.

Local employment data was released on Tuesday, and remained unchanged from the last quarter in 2017. Markets and analysts expected unemployment levels to move up to 28%, but remained at 26.7%. Looking forward, major EU inflation data will be released later today, which can have an impact on the Rand and could possibly depreciate the Rand further. Speculators and investors will keep a close eye on the brent-crude oil prices along with the US bonds, as this will further impact the Rand and other emerging countries. Currently the USD/ZAR pair is trading around 12.5854.

NGN

The Naira appreciated 2.3 points yesterday against the US dollar at the parallel market. We saw the Naira trading at NGN 362.3 on Monday and yesterday at NGN 360. While the Euro and Pound closed at NGN 428 and NGN 497, respectively.

Nigeria and China recently signed a bilateral agreement to operate a three-year currency-swap deal aimed at improving trade between both countries. The value of this deal is in the region of USD 2.5 billion which translates to NGN 720 billion for Nigeria and RMB 15 billion for China, this has brought about mixed reactions throughout Nigeria.

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