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Exchange4free Global Forex Report (20/06/2018)


The US Dollar climbed to its highest level on Tuesday since July 2017, with traders driving the currency higher thanks to the dollar’s safe haven appeal and expectations that tariffs on imported goods could boost inflation.

US President Donald Trump announced late on Monday that they will be imposing a further $200 billion tariffs on imported Chinese goods. Analysts say that with the US economy being at full capacity, increased tariffs will most likely fuel inflation. Along with that, the US central bank has returned to its active mode and is in the midst of a rate hike cycle, which boost the economy and USD value further. The US dollar’s high can also be connected to political uncertainty regarding Brexit and monetary policy disappointments in the Eurozone. Currently the EUR/USD currency pair is trading around 1.15715, compared to 1.15650 from last week.


During Tuesday’s session, the EUR/USD moved to the upside on the back of a retreating US Dollar across the board. Analysts at Morgan Stanley say that the recent levels of the EUR/USD currency pair is attractive to investors and traders alike. Analysts argue that the recent sell-off was sparked by the European Central Bank (ECB) and left the single currency pair positioned for for a strong long term recovery.

The ECB announced last week that interest rate hikes will only take place in 2019 and that quantitative easing will be coming to an end as well. Morgan Stanley analysts believe that the ECB’s shrinking role in the European bond market and latest guidance on Eurozone interest rates, will mean that the Euro becomes increasingly attractive. Investors and analysts will be looking towards the release of June PMI data in the Eurozone on Friday. Currently the EUR/USD currency pair is trading around 1.15715, compared to 1.15650 from last week.


The Sterling could remain an under performer into the mid-week period, as domestic political risks remain a focus for the foreign exchange markets. The UK government’s flagship Brexit bill is back for debate at the House of Commons today (Wednesday), after the house of Lords failed to approve the Bill and ensure the Sterling uncertainty remains. The failure of approval brings to light another danger point for Prime Minister as she fails to unify her party around the government’s official position regarding Brexit.

The remaining uncertainty around the Brexit Bill, is causing political uncertainty in the foreign exchange market leaving the GBP/EUR currency pair trading around 1.14, compared to 1.1455 earlier this week. Today’s (Wednesday’s) Brexit talk in the House of Commons can have a significant impact on the Sterling, for a defeat for the government will have a negative effect on the Sterling, as it raises the concern of government stability. Analysts say that, should the current government and Prime Minister stay intact, it could have a positive effect on the Sterling. Markets and investors will be keeping a close eye on the outcome of today’s Brexit negotiations.


During Tuesday’s session, the Australian Dollar slid below 74 cents against the US dollar, for the first time in a year. The slide was caused by worsening trade disputes between the US and China, Australia’s largest trading partner.

Craig Vardy, BlackRock’s head of fixed income, warns that the Australian dollar faces more pressure as policy divergence sees the Australian bond yield dip below those of the US treasuries. Analysts warn that the Australian dollar is at risk of sliding to 70 cents against the US dollar this year as China’s economy slows and the Federal Reserve keep raising interest rates. Currently the AUD/USD is trading around 0.7393, down almost 2.1% from last week.


Safe haven currencies, such as the Swiss Franc, rose on Tuesday after US President Donald Trump threatened to slap more tariffs on China. The announcement caused traders to flood towards less risky currencies as trade tensions increase between the world’s two largest economies.

The outlook for the Swiss Franc is not without its hurdles, for on Thursday the Swiss National Bank (SNB) will meet to broadcast their monetary policy strategy. Strategists say that this “generally sleepy meeting” should get more attention in the light of higher domestic inflation, ECB normalization and mounting political risk in Europe. The SNB will avoid any news or announcements that would spark the appreciation of the Swiss Franc.Switzerland’s economic pulse continues to surprise to the upside, with PMI surveys running above average, while GDP growth is coming off a strong first quarter. Looking forward, the SNB is one of the last G10 movers towards normalization and will only see interest rate hikes by September 2019, based on the ECB policy path. Currently the CHF/USD pair is trading around 1.004, compared to 1.006 from last week.


The South-African Rand fell to its weakest in almost 7 months during Tuesday’s session and government bonds weakened sharply as U.S President Donald Trump threatened to slap more tariffs on China. The announcement left the Rand trading around 13.77 to the US Dollar.

The Rand led to losses in emerging market currencies as sentiment was also weighed by concerns over the domestic economy after a string of poor economic data and increasing power outages due to illegal protests over wages by ESKOM workers. Analysts advise that the Rand will remain volatile for the remainder of the second-and third quarter of 2018 as it remains at risk for heavy portfolio outflows. June inflation data is said to be released later today, and analysts do not believe that it would have any positive effect on the position of the Rand, as investors and market participants are more focussed on ongoing wage protests and power cuts by Eskom. Currently the USD/ZAR pair is trading around 13.6940.


Nigeria’s President Muhammandu Buhari, will sign the 2018 budget into law later today. Femi Adesina, president spokesperson, said that the 2018 national budget, passed by parliament last month, will be signed at 12pm today.

Africa’s top oil producer emerged from their first recession in 25 years, helped by higher crude prices as oil sales make up two-thirds of government revenue. Economic growth for the nation still remains fragile due to slow development and political instability. Analysts say that the recession was mainly caused by low crude oil prices and militant attacks on energy facilities. Currently the USD/NGN currency pair is trading at 314.5.

Exchange4free Global Forex Report (06/06/2018)
Exchange4free Global Forex Report 27/06/2018

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