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Exchange4free Global Forex Report 27/06/2018

USD

A robust U.S economy and the trajectory of the Federal Reserve’s monetary policy is said to be the reasons for the continued allure of the US Dollar. The US Dollar rose against most major currencies during Tuesday’s session, as rising trade tensions prompted traders to abandon high-yielding currencies and investors focused on expectations that the Federal Reserve Bank will continue to raise interest rates.

With a more quiet market in terms of data release, investors are shifting their attention to the latest trade war development between President Donald Trump and Harely- Davidson. Trump threatened to impose a “big tax” on the group should they choose to move production out of the US. Some analysts believe that the trade tensions could work in the US economy’s favor, for the country and its economy will have to focus on producing locally and investment will take place which could lead to further Dollar strength.

The FED’s president, Robert Kaplan, said on Tuesday that the U.S central bank’s monetary policy is still accommodative and suggested it could raise rates at least twice more, which will help to enhance the attraction of the US Dollar. The political uncertainty in Britain surrounding Brexit and the EU’s involvement in the trade war, also helps attract investors to the US Dollar and supports the currency’s strength. Currently the EUR/USD and GBP/USD currency pairs are trading around 1.16585 and 1.3199 respectively.

EUR

During Tuesday’s session the EUR/USD currency pair edged lower and was trading around 1.1675, down almost 0.24% from Monday. Analyst believe that the recent slide in the currency pair is due to the lack of economic data releases in the Eurozone and ongoing trade tensions between the United States and its trading partners.

The European Union (EU) has joined the trade war against the United States after announcing that they will be enforcing a 25% tariff on $3.3 billion of US goods. The tariffs came as a response to the US tariffs on EU steel and aluminum imports. U.S President Donald Trump threatened that a 20% tariff will be imposed on EU vehicle imports. Such a move could take a toll on German auto giants Daimler and BMW and could potentially sour investors against the Euro. Analysts and speculators alike will keep a close eye on the tensions between the U.S and the EU these coming weeks, as it can have a negative impact on the currency pair. Currently the EUR/USD pair is trading around 1.16585 compared to 1.6005 from last week.

GBP

The Sterling started the week of on a softer note against the Euro and was left the currency pair trading in the region of 1.1357. The price action proved to be disappointing for those investors who were looking for a stronger Sterling.

During the Bank of England’s June policy meeting, they have signaled a possible interest rate hike for either August or November. Analysts were hoping that the Sterling would be able to capitalize on the announcement, but instead the GBP/EUR failed to break through the 1.15 mark. This failure indicates that this is a very sticky market and that any losses or gains are liable to remain contained. This is good news for businesses and individuals that crave stability, but bad news for those who are looking for a sudden increase in buying power, be it either in Euro or Sterling in the near term. The volatility in the GBP/EUR currency pair is low, which indicates that the market conditions for the currencies are likely to persist.

Looking to the week ahead, Brexit will be front and center for the Sterling as the European Council meets the 28-29 June for the European Summit. Markets will be looking for more concrete outcomes that give a clear view of the future. Currently the GBP/EUR currency pair is trading around 1.13428 down almost 0.13% from Monday.

AUD

The outlook for the Australian Dollar has gone from bad to worse in 2018, and analysts from Rabobank believe that the Australian Dollar can expect further declines in the months ahead. The decline in the Australian Dollar was mainly due to deterioration in the Australian inflation outlook as well as ongoing trade tensions between China, their biggest trading partner, and the United States. Analysts at Rabobank say that Australia has limited bargaining power, which means that they have limited control over how the US/China trade war impacts domestic producers.

Should China’s growth slow- down even more, due to US’s attempt to improve its trade deficit, there is a risk that the demand for Australian products could stall. A slow -down in the Chinese economy could negatively impact Australia’s key exports which include iron, ore and coal. With Australia’s exports mostly comprised of commodity products, the Australian Dollar and economy is left vulnerable to changing whims in investors sentiments. Currently the AUD/USD is trading around 0.7382, down 0.15% from last week.

CHF

Last week Thursday, the SNB (Swiss National Bank) announced that they were going to keep their negative policy rates unchanged. The interest on sight deposits is at -0.75% and the target range for the 3 month Libor (London Interbank Offered Rate) is between -1.25% and -025%.

The Swiss Franc remained relatively stable following this announcement as these monetary policy decisions were in-line with expectations.

The SNB raised their forecast for short term inflation for 2018 to 0.9%, which is 0.3% higher than what they had projected in March.

ZAR

Over the past week the Rand has moved drastically and was seen trading anywhere between 17.83 and 18.45. The South African Rand is known to feel the brunt of emerging market sell-offs, since it is one of the most liquid emerging market currencies in the open market.

Analyst say that the primary reason for the sudden decline in the South-African Rand is due to the renewed trade wars between the US and its trading partners. The underlying reason for the weakness in the Rand, is because of recent political changes in Turkey, as a new popular president has been elected. The new development caused a surge in the Lira, which put a damper on other emerging market currencies. Looking to the week ahead, on Friday the EU release their CPI data, which analysts expect to improve. If the CPI data does improve, it will cause a surge in the Euro and a weakness of the ZAR. Currently the USD/ZAR currency pair is trading around 13.5398.

NGN

During Tuesday’s session the Niara weakened marginally against the US Dollar and was let trading at 360 on the parallel market, while the Pound and Euro were trading at 480 and 420 respectively.

Nigeria is still celebrating their emergence from the recession and an increase in oil exports. Analyst do advise that the recent announcement from OPEC to produce 1 million extra barrels to reduce oil prices, might have a negative effect on Nigeria’s oil export.

Exchange4free Global Forex Report (20/06/2018)
Exchange4free Global Forex Report (04/07/2018)

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