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Exchange4free Global Forex Report (21/06/2017)

USD

The Federal Reserve (FED) raised rates last week, surprising markets with the upbeat tone of the rate statement. FED policymakers showed us that the labour market has remained strong. They dismissed weak inflation levels as being temporary.

Charles Dudley, President of the Federal Reserve of New York, continued the upbeat message warning the FED against stopping its current tightening cycle.

If the FED continues to send out a hawkish message, the odds of a rate hike in December or September are likely to increase.

EUR

With the Brexit negotiations underway the GBP to EUR exchange rate is set to become increasingly prone to political headline risks and could fall.

Strategists at Morgan Stanley predict the EUR against the GBP will weaken in the short-term but the Euro will continue to rise thereafter. They are expecting the Euro will be better than the Pound in the long term despite concerns of the Euro being overvalued.

Given the recent election in the UK, Brexit is sure to have an impact on this and rates are bound to fluctuate once negotiations progress further.

GBP

The GBP saw major losses in yesterday’s session. The GBP/USD is trading at 1.2620, down nearly 1 percent. Yesterday the Bank of England’s Governor, Mark Carney, warned against interest rate hikes. Carney poured cold water on raising interest rates, saying that “now is not yet the time to begin that adjustment”.

Election uncertainty appears to be a direct negative for the British Pound, evident as the election results were coming-in last week. GBP/USD broke back-down into the prior range by piercing below 1.2750.

AUD

According to the views of leading FX analysts, the direction of the AUD will be influenced by the outlook for commodity prices.

The AUD reached 0.76 against the USD after rising over 3 percent in the last six weeks, from a four month low of 0.735 earlier in May. 
Reserve Bank of Australia (RBA) anticipated a broad cool down in the economic growth in the first quarter resulting from weaker consumption growth. RBA voted to leave interest rates at a record low of 1.5 percent at their most recent meeting.

CHF

Swiss banks have not been happy under the weight of negative Swiss interest rates for more than two years. However, abandoning the surcharges on the Franc would be just as disastrous.

The Swiss National Bank (SNB) showed no sign of stepping away from the method at its quarterly rate-setting meeting last week, with policy makers showing little compassion for banks.

ZAR

Earlier in the week the Rand lost some ground as the Public Protector suggested a change of the South African Reserve Bank’s (SARB’s) objective as stated in the constitution.

Contrasting views on the topic emerged from the ANC who seem to be against the idea while trade unions are in support of the Public Protector. The SARB has stated the comments were not legal and will challenge the Public Protector’s statement.

Ratings agency S&P has warned of a further downgrade if there is to be a change to the constitution.

The Rand movements from yesterday showed no signs of being impacted by any of this, the movements were mainly in line with other risk currencies. Foreigners are not panicking as they returned to the bond market as net buyers.

Keep an eye out for South Africa’s CPI data a bit later today.

NGN

The Naira made a significant gain in the parallel market. This, as the Central Bank of Nigeria (CBN) injected USD 195 million into the inter-bank forex market to meet the requests of customers in the various segments of the market.

The Naira gained 3 points to move up to NGN 364 per Dollar in the parallel market, from the previous rate of NGN 367.

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