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Exchange4free Global Forex Report (25/07/2018)

USD

Data releases from the US and Eurozone have been less than appealing, which shifts market focus to a meeting between US President Donald Trump and European Commission President Jean Claude Junker. The Commission President arrives in the US with the main objective to dissuade the White House from moving forward with increased tariffs on auto imports. Motor vehicles are a leading export commodity and the US is the biggest overseas market for the EU.

The proposed tariffs are not popular amongst the US population, as the US production lines and supply chains extend beyond national borders. With tariffs imposed, the domestic production and domestic economy would suffer as a consequence. Analysts and speculators believe that President Trump is most likely to scrap import tariffs, as upsetting key constituents would be unwise just before mid-term elections. The meeting between US President and European Comission president, will be a key indicator for investors and market participants to buy or sell US Dollar. Currently the EUR/USD is trading around 1.1685.

EUR

During Tuesday’s session the EUR/USD currency pair was trading around 1.167, posting losses for a second week in a row. The Euro has been losing some ground over past weeks and analysts say that the weakness in the Euro could be due to rising trade war fears and the European Central Bank’s (ECB) meeting on Thursday. During the ECB’s meeting on Thursday, officials will discuss key interest rates and whether to step in and tackle issues surrounding the failing Euro.

Flash PMI data from the Eurozone delivered mixed results creating choppy price action for the Euro. The latest PMI data delivered an unclear picture of demand on the back of French data missing its mark, German data showing strength in manufacturing but composite readings came in lower than expectations. The overall PMI remains above the 50 boom/bust mark, but it is the second month in a row that the PMI results have seen lower readings. Analysts believe that the lower PMI data is the result of trade tensions, Brexit and political factors in Italy. Currently the EUR/USD currency pair is trading around 1.1685, up almost 0.13% from Tuesday.

GBP

The Sterling made a slight advance on the US Dollar and was left trading around 1.31 during Monday’s session. Speculators and analysts say that the appreciation of the Sterling is mainly due to optimism about the week’s Brexit developments. During this week, Prime Minister Theresa May, will meet with key EU figures to discuss Brexit and how to move forward. The race is on to secure a final Brexit agreement with the EU by October, where after EU officials are expected to approve the deal before the UK’s exit in March 2019.

Looking ahead, the Sterling might be affected by the comments from the ECB, regarding policy and currency strategy during their meeting on Thursday. Analysts and speculators will be keeping an eye on the outcome and comments from this meeting, as it will give them an indication as to where the Sterling is headed. Currently the GBP/USD pair is trading around 1.3157, up almost 1% from last week.

AUD

During Tuesday’s session the Australian Dollar gained some strength as risk assets rebounded from earlier losses and traders positioned themselves for inflation data releases for the second quarter. This left the AUD/USD currency pair trading around 0.7417, trading almost 0.5% higher on the day. The inflationary data will be key to the expectations for the Reserve Bank of Australia’s monetary policy and the Australian dollar during the months ahead.

Markets expect inflation to rise with 0.5% for the second quarter, compared to 0.4% from the previous quarter and leaves forecasted inflation at 2.2% per annum.Analyst say that a rise in CPI inflation from 1.9% to around 2.2%, is unlikely to make RBA want to raise interest rates sooner. Paul Dales, economist at Capital Economics, believes that most of the increases will be due to the temporary leap in petrol and oil prices.

CPI data is said to be releases later today and is of increased importance to the Australian Dollar given the currency has been badly hurt by the RBA’s decisions regarding interest rates. The CPI data will give analysts and investors an idea as to where the Australian Dollar is heading. Currently the AUD/USD currency pair is trading around 0.7395.

CHF

There has been some political turbulence this week which has seen the Swiss Franc against the Pound trading at 0.7652, compared to last weeks high of 0.7697. This has come about mainly due to positive developments in the Brexit talks.

The only notable Swiss news last week was a trade balance reading for June, which showed an expansion of May’s surplus from 1.24bn to 1.31bn.

Something to keep an eye on is Switzerland’s ZEW survey, expectations for July. The report will be released at 8:00 GMT.

ZAR

During a state visit to South-Africa, Chinese president Xi Jinping promised a $14.7 billion investment, which will help boost economic growth after almost a decade of stagnation. Among agreements signed on Tuesday, Chinese banks lent a combined $2.5 billion to struggling state owned power utility, ESKOM and logistics company, Transnet. After the announcement, the Rand strengthened almost more 1% against most major currencies.

South African President, Cyril Ramaphosa will be hosting a BRICS summit later this week, where he is hoping to get more investments. These injections into the South-African economy will help boost economic growth through trade and business development. A better economic situation for South-Africa means that the Rand will also flourish.

Analysts and investors will keep an eye on the outcome of the Summit as well as global data releases, as these events will most likely have an impact on the South-African Rand.Currently the USD/ZAR pair is trading around 13.2389, up almost 2.2% from last week Tuesday.

NGN

The Naira remained stable on Monday at the parallel market trading at N358 to the dollar. While the Naira traded at N480 and N418 against the Pound and Euro respectively.

Since the Central Bank of Nigeria began its aggressive interventions at the foreign exchange market, the Naira has been fairly stable at the parallel market.

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