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Exchange4free Global Forex Report (17/01/2018)

USD

On Monday, the Dollar fell to a three-year low against other major currencies, after the Euro bounced back from a setback caused by Chancellor Angela Merkel’s grand coalition announcement. The EUR/USD pair traded at 1.2208 on Monday and is currently in trading around 1.2235.

The announcement made on Monday by Haruhiko Kuroda, Governor of The Bank of Japan, caused the Dollar to lose some ground. After Kuroda announced The Bank of Japan’s plan to keep up their stimulus programme, the Dollar slipped to its lowest levels against the Yen since mid-September.

Speculators believe that the Dollar is bound to stay weak throughout 2018 if the views of market participants regarding normalization of monetary policies prevail.

EUR

After the US public holiday on Monday, US traders return on Tuesday. The EUR/USD pair was trading at 1.2255, down 0.07% on the day with only a small loss compared to the 2.4% gain over the past week.

Spectators believe there are two contributing factors to the upward trend in the Euro. The first factor involves the speculation that the European Central Bank will be winding down their asset purchase programme in September and tighter policies could be the way for the Eurozone. The second factor is the major coalition progress in Germany, where both parties have agreed on a coalition draft, ending months of political uncertainty.

GBP

The Sterling experienced a minor fall of 0.15% to 1.3773 against the USD in Tuesday’s trading session after British inflation edged towards the forecasted 3%. This after the GBP/USD pair gained in excess of 1% during the course of the past week.

Commentators have noted that, the combination of a weaker pound and higher inflation rates, have caused consumer purchases to decrease. On the other hand, the cheaper Pound has been a boon for the export sector. Brexit negotiations have caused the Sterling to rally in recent days, as hopes grew that some European Union members might be willing to offer

Britain more favourable terms. Investors shifted their focus to the “better-than-expected” economic performance in the UK, away from increasing political risks.

AUD

The Australian Dollar continued to rally against the US Dollar, with the pair hitting a high of 0.7960 on Tuesday morning, just 40 pips shy of reclaiming the 0.80 level since September. In recent months the Australian Dollar has jumped over 6% against the US Dollar, which has been predominantly driven by higher commodity prices and a weaker US Dollar.

CHF

The Swiss Franc managed to gain some ground earlier in the day as the Pound began to retrace some of its earlier gains following the release of the UK inflation data. The pair has reached long unobserved levels, which is evident from the current trading levels.

The GBP/CHF pair is currently trading around 1.3281, compared to 1.3252 last week. There are no major economic events out of the region this week, however the Swiss National Bank will be in favour of a weaker Swiss Franc with the hope of driving growth in the local economy.

ZAR

The Rand has been holding its ground against the major currencies in recent weeks. A weakening Dollar, improving commodities and Cyril Ramaphosa’s election as the new ANC leader have all been contributing factors to the Rand’s resilience.

On Friday, the GBP/ZAR pair broke above 17.00, a lot of it was caused by ZAR weakness; due to political uncertainty surrounding President Jacob Zuma and allegations of state capture. That being said, GBP strength played a helping hand as news broke that the stance of some EU members surrounding Brexit had softened. At the time of writing, the Rand is currently trading at levels around 16.95.

Spectators speculate that the main risk factors for the coming weeks will stem from outside factors such as global inflation rates and interest rates. These factors could possibly have a negative impact on the Rand.

On the local front, the Monetary Policy Committee will be discussing interest rates on Thursday. Rates are expected to be kept on hold 6.75%. The possibility of a credit downgrade still looms over South Africa, which causes uncertainty amongst investors and increases volatility of the Rand.

NGN

The Naira closed at 360 to the US Dollar on 12 January, but is currently trading at around 360.499 per US Dollar. News in the region includes the militant group, Niger Delta Avengers, planning on attacking the Nigerian oil sector in coming weeks. This announcement could have a negative effect on the USD/NGN pair and significantly impact on the export sector of Nigeria if pipelines were to be destroyed.

Further weakness of the Naira is something that the central bank of Nigeria would hope to avoid as far as possible given their intervention in markets over the past few weeks as an attempt to stabilise the currency as much as possible and also improve liquidity in Nigeria.

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