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Exchange4free Global Forex Report (23/05/2018)

USD

During Tuesday’s session the US Dollar struggled to stay near its five-month high, as investors took positions before the release of the Federal Reserve Bank’s minutes. The Fed’s minutes will be released later today and investors will be looking closely for any sign of monetary policy tightening.

The recent macro-economic data, increased bond yields and rising inflation gives investors and market speculators reason to believe that the Fed will increase interest rates and tighten monetary policy. Interest rates have already been hiked in March and are expected to hike twice more throughout the year. Increased interest rates tend to boost the Dollar and make the currency more attractive for yield-seeking investors. Analysts do advise that investors should keep an eye on the political standings in the United States, as Iran and the US are still on unsteady grounds. Currently the EUR/USD currency pair is trading around 1.17206, compared to 1.17834 from last week Tuesday.

EUR

The EUR/USD currency pair posted some losses during today’s opening session, supported by ongoing political uncertainty in Italy. The heavily indebted nation will now be governed by the anti-establishment 5-Star Movement and Far-right League. Markets are worried that the populist government’s fiscal loosening plans can have a negative effect on their credit rating.

The fall in the currency pair was further caused by trade tensions, as reports have indicated that US President, Donald Trump, is considering a 10% reduction in steel and aluminium imports from the European Union. Analysts will be watching closely as German and Eurozone preliminary PMI data will be released, along with the Federal Reserve Bank’s minutes in the US. Currently the EUR/USD currency pair is trading around 1.17206, down 0.517% from last week.

GBP

Theresa May has come under increased pressure from the likes of Boris Johnson and Michael Gove in recent weeks to finalise their Brexit plan and exit the customs union as soon as possible. The Sterling has been under enormous pressure and another rejected plan from Brussels earlier this week does not bode well for the currency.

On Tuesday Mark Carney, Governor of the Bank of England, faced questions from UK lawmakers where he denied that the bank had confused investors by not raising interest rates last month when a rate increase was largely expected.
Carney is of the opinion that the UK economy will bounce back after a poor first quarter.


The Sterling has lost almost 4.5% over the past month against the greenback and was trading in the region of 1.3360 (GBPUSD) earlier this morning.

AUD

According to the Commonwealth Bank of Australia (CBA), it’s likely that the Australian dollar has dropped to its lowest levels for 2018 during May.

The pressures pushing AUDUSD down have eased off. According to the CBA, this currency pair is expected to be trading between 0.74 and 0.76 in the coming weeks and has been predicted to be trading around 0.78 by the end of this year.

The GBP/AUD rate is expected to rise by around 3 percent by the end of the year from its current levels of around 1.77 to 1.82.

CHF

The Swiss Franc rose against the dollar today as a wave of caution pushed through currency markets a day after US President Donald Trump tempered optimism over progress made in trade talks with China.

The Franc against the euro also rose today as we saw much softer than expected PMI manufacturing and services data from across the Eurozone. The franc is expected to strengthen more as prices trade above the 200-day moving average.

ZAR

The South African Rand has experienced a volatile week thus far largely driven by global markets including news out of the USA that trade talks have been put on hold with China. A rallying US dollar has left emerging market currencies, including the rand, losing ground over the past few days. Some strength was shown on Tuesday as the rand managed to claw back to 16.80 (GBP/ZAR) and 12.58 (USD/ZAR).

On the local front, CPI data for April was released earlier this morning and came in lower than expected at 4.5%, where expectations for the release were at 4.7%. An increase in inflation was expected for April in comparison to March 2018 with the increase in VAT of 1% taking effect on 1 April 2018. Inflation is expected to continue to rise with increased fuel prices in the coming months.

NGN

The Naira weakened yesterday by 0.28 percent to NGN 364 in the parallel market, while it had strengthened by 0.02 percent to NGN 361.41 in the Investors, Exporters and End-users FX window.

The currency swap agreement between Nigeria-China of NGN 720 billion will not extend to the importation of items from China, turning Nigeria into a dumping ground for Chinese goods.

The Central Bank is predicting that the deal will ease demand for dollars and thus enhancing the value of the Naira.

Exchange4free Global Forex Report (16/05/2018)
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