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Exchange4free Global Forex Report (28/02/2018)

USD

The Dollar edged down against most major currencies during Tuesday’s session, with investors and speculators cautious ahead of new Federal Chairman, Jerome Powell’s testimony. Powell’s testimony will determine whether the currency will recover from a three-year low.

The US markets braced themselves for weak durable goods data, for Core Durable Goods Orders are forecasted to dip 0.4% and Durable Goods Orders are expected to fall to 2.4%.

Jerome Powell did not have the best start or welcome as the new Chairman of the Federal Reserve, for markets erased $4 trillion in valuations after his election. The volatility caused Powell to make a public statement to reassure markets that the Fed is monitoring the situation.

Analyst believe that, regarding Powell’s testimony, he will play it safe and keep away from any risky headlined which could cause further fluctuations in the market. Powell could focus on strong US economy and the Fed trimming their balance sheet. Currently the EUR/USD pair is trading around 1.22251 up 0.36% from last week Thursday.

EUR

During Tuesday’s session the EUR/USD pair slipped to a fresh weekly low and was trading around 1.22304. The slip in the pair was caused by fresh developments from the Euro-zone and the semi-annual testimony from Fed chairman Jerome Powell.

A further decline in the currency pair may be expected, as the core-rate of inflation is expected to slow to an annualized 1.2% from 1.3% in January 2018. The European Central Bank (ECB) released their minutes from January, where they voiced their concern over the recent volatility of the Euro. Currently the EUR/USD pair is trading around 1.22251 up 0.36% from last week Thursday.

GBP

The Sterling has fallen 0.15% against the Euro during Tuesday’s session, which left the pair trading around 1.132. The Sterling has been under pressure and has been devalued by political developments regarding Brexit and whether the country aims for European Union (EU) single market access.

Another factor contributing to the low Sterling investor confidence, has been Scottish Minister Nicola Sturgeon’s rejection of the latest devolution deal from the UK government. The ministers’ resilient attitude raises the risk of approval of an amendment to the government's trade bill by SNP, Labour and Conservative rebels, when it is voted on next week. Currently the GBP/EUR is trading around 1.13637.

AUD

Analysts at Bill Evans have revised their forecast profile for the AUD/USD pair, following a review of their forecast for commodity prices. It is expected that the AUD/USD pair will hold around 0.77 to June, where previous estimations for the pair was around 0.76. The key drivers behind the review is a fall in commodity prices through 2018 and 2019, a sharp widening in the AUD/USD interest rate differential and some reversal of the current trend of the USD to weaken against other major currencies.

During Tuesday’s session the Australian Dollar remained unchanged from where it began the week and was trading around 0.785 against the USD, as traders tweaked their positions ahead of Jerome Powell’s first public appearance as Federal Chairman. Currently the AUD/USD pair is trading around 0.7805.

CHF

The value of the EUR/CHF pair has subsequently stabilized, but the pair remains well below last month’s peak. Currently the pair is trading around 1.14955, compared to 1.15565 last month.

Other safe haven currencies, like the Japanese Yen, are holding well against the US Dollar and the Sterling, which is evidence of the fact that investors risk appetite is below the levels from the beginning of the year.More factors influencing the stability of the EUR/CHF pair included, the strong growth in the Euro-Zone last year and a calmer than expected political backdrop.

Analysts at Rabobank have stated that the CHF is about 40% overvalued against the Euro, which implies that the upward trend in the EUR/CHF has stalled. Speculators and investors alike believe that the market has come to terms with the possibility of less USD liquidity, which is set to be a headwind for growth and appetite risk. Strong world growth may lessen the demand for safe haven currencies such as CHF in the coming months, and analysts expect that the EUR/CHF pair will struggle to move above the 1.16 level.

ZAR

The Rand lost some ground on Tuesday after parliament passed a motion that will start the process to allow for land expropriation without compensation. This came after President Cyril Ramaphosa brought back Nhlanhla Nene to the post of finance minister, as part of a broader cabinet reshuffle on Monday night. Analyst speculate that another reason for the Rand’s weakness, is the decision of Ramaphosa to retain some ministers with possible ties to the Guptas.

The Rand rallied in the run-up before the cabinet reshuffle was announced. The Rand failed to hold below 11.51, which is a key technical level that could unlock further gains for South-Africa. The slide in the Rand was in-line with other emerging currencies, as the US Dollar bounced back, while demand for risk currencies was also cooler, due to the prospects of interest hikes by the Federal Reserve.

Local and international traders will be keeping a close eye on the trade-balance that will be released later today, for it may offer a push back in the short-term against the Rand’s strength. Currently the USD/ZAR pair is trading around 11.76168 compared to 11.64015 last week.

NGN

On Monday the Naira showed a stable position against the USD and the Euro, and was trading around 362 and 482 respectively on the parallel market.

Nigeria’s non-oil economy grew 1.5 percent year on year in the fourth quarter of 2017, its strongest performance since 2015, this was according to GDP data from the national Bureau of statistics released yesterday.

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