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Global Forex Report (25/01/2017)


Trump has come in and inherits a USD that’s 14% stronger than when Barak Obama was sworn in as President. The USD has been on the rise since Trump won the election on speculation that Trump’s economic plans will push growth and inflation, prompting the FED to raise interest rates and make US treasuries more attractive to foreign buyers. Although markets are still watching closely to see what Trump is going to implement in the first few days in office.


EUR/USD gained some traction following the release of the German IFO for the current month, advancing to the 1.0740/45 band, or daily peaks. The EUR/USD is navigating a narrow range with support emerging near 1.0710, while the upside appears limited around the vicinity of the 1.0740 area.


The British pound fell and London’s FTSE 100 index rose on Tuesday after the Supreme Court ruled that the government must go through parliament, but not the UK’s regional assemblies, to trigger talks on leaving the EU. The GBP jumped to a 5 week high as the ruling was being read. Many market participants said the decision yesterday had been factored in to the sterling. Today we see the GBP/EUR at 1.17 and GBP/USD at 1.26 at the time of writing.


The AUD slipped a little on Wednesday after official consumer price index (CPI) came in below expectations. The market was looking for gains of 0.7% and 1.6% annually, CPI actually rose 0.5% and gain of 1.5%. The AUD/USD slipped to 0.75656 after the numbers, from 0.75979 before their release, with the Aussie falling against the likes of the Yen, Euro and Pound too.


The CAD to USD exchange rate could collapse to its 2002 lows, to around 0.62. The technical and fundamental analysis both suggest a dire outlook for the CAD against the USD. Currently there is interest rate disparity between the US and Canada. At the moment the US FED is on track to raise interest rates while the Bank of Canada seems adamant about doing the opposite. In situations like these, the currency of the country with lower interest rates loses value.


Nigerian Law makers have put into place an official exchange rate of 305 naira per dollar in the 2017 budget, they have also asked the central bank to close 40% spread with the black market. Members of parliament have been worried about the exchange rate differential which they said is damaging for the economy and has led to the loss of investor confidence. The Central Bank of Nigeria (CBN) kept the official monetary policy rate unchanged at 14% for the third meeting running.


The South African Reserve Bank kept the prime lending rate unchanged yesterday with a somewhat hawkish tone. This came in line with expectations. Yesterday the Rand movement was mainly caused by “Trump trade”. Risk currencies and assets have been edging stronger in recent days but surged yesterday as Trump’s policies have switched to growth rather than protection focus. Notable moves include S&P 500 pushing record highs. Yesterday’s Rand moves were mostly about risk sentiment. We saw the GBP/ZAR range between 16.55 and 16.95, showing us there has been volatility over the week and possibly more to come.

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