20161129 – DAILY FX COMMENT

  High Low     High Low
EUR/USD 1.0622 1.0588   USD/ZAR 13.88 13.69
GBP/USD 1.2422 1.2387 GBP/ZAR 17.24 16.98
EUR/GBP 0.8561 0.8537 USD/ILS 3.8505 3.8313
GBP/EUR 1.1714 1.1681 S&P 500 2205 2200
USD/JPY 112.36 111.61 Oil (Brent) 49.21 48.56
GBP/AUD 1.6620 1.6546 Gold 1195.0 1188.0
        USD/NGN yesterday’s close   472
             
Please get in touch with us if you need the latest USD/NGN price  

 

FX markets have been somewhat subdued (if I can use that terminology) over the past week or so as event risk continues to dominate the markets. With the Italian referendum, French elections and OPEC meetings looming, FX traders have and are positioning themselves for further bad news (which you could say all favour the USD).

OPEC: Well we all know what oil companies are hoping for, a cut in production to help stabilise and raise prices. Oil companies small and large have been cutting investment, piling on debt and slashing jobs to keep their heads above water. A cut in production will go a long way to helping these companies as demand and supply begin to “equalise”. Oil is still hovering around the $50p.b mark and while we don’t expect a sudden spike in prices, we do however expect stabilisation which will help create a sense of calm. Winner, the USD.

ITALY: The referendum in Italy takes place this weekend with the current PM Renzi citing even if he wins he will resign and seek to create a new government. Fighting talk, but with the current polls (ah the famous polls) showing he is likely to lose and lose big, I guess you could assume either way, win or lose, Italy will be looking to elect a new PM. Once again the electorate will be voting against the establishment. Basically Renzi is trying to change Italian laws allows political parties to amend and change laws quicker and easier. Seems though the Italian electorate is against this as they fear these same laws that “protect” them will now be able to change without having to go through the elaborate and complicated Italian political and legal system. Winner, the USD.

FRANCE: Francois Fillon has won the right to contest next year’s French election by a majority of 66.5-33.5 (vs Alain Juppe).  Current polls (ah the famous polls) suggest he would “easily” beat the far right party of Marine Le Pen. Don’t count your chicken just yet Mr Fillon. There is a long way to go and anything can change. Another terror attack will help Le Pen no doubt. Mr Fillon is proposing dramatic economic reforms which include slashing half a million public jobs (he loses their vote), ending the 35-hour week (he upsets these folk), raising the retirement age (loses the over 60 vote but wins over the youth), and scrapping wealth tax (wins the 1% well off). Be careful what you wish for Mr Fillon, because as we all know the French electorate are fickle and can change their views very quickly. Winner, it’s a tie.

USA: We are all expecting the FED to raise US interest rates on 14th December. By how much well, that’s the million USD question. Today we will see how Q3 GDP faired with analysts expecting 3.00% from 2.90% Q2. A strong number today and strong NFP number on Friday will certainly help the FED’s position. I have recently said while 0.25% is widely anticipated and expected, I would not be surprised at all to hear the FED raising by 0.35 or 0.50% and killing 2 birds with 1 stone. However caution is probably best and with Trump winning the elections, Pres. Yellen will in all likelihood take the cautious route and hike 0.25% and wait and see. Yellen and Trump are known not to see eye/eye, however unlike Gov. Carney, Pres. Yellen will see out her term. I shudder to think who will take over from her. Given Trumps recent hiring spree, I can only think that person is going to be someone who he can “control”, perhaps his accountant? Either way the USD will be the winner here.

And so to the GBP….oi vei. Nothing good to say really. Vs the USD and EUR these past few weeks, the GBP has held up well. However I believe that could all be coming to a bitter end, at least vs the USD that is. IF as above Q3 data and NFP exceed expectations and a rate rise is indeed a foregone conclusion the USD will rally vs all the majors (EUR, GBP, JPY, AUD, etc.) leaving the GBP to lick its wounds and head towards the psychological 1.20 barrier. However strangely vs the EUR we expect the GBP to fair better as the USD rallies more vs the EUR than vs the GBP. Time will tell… but things are about to get nasty.

Have a good day

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20161118 – DAILY FX COMMENT

  High Low     High Low
EUR/USD 1.0630 1.0581   USD/ZAR 14.57 14.39
GBP/USD 1.2426 1.2382 GBP/ZAR 18.05 17.85
EUR/GBP 0.8564 0.8541 USD/ILS 3.8799 3.8581
GBP/EUR 1.1708 1.1677 S&P 500 2188 2182
USD/JPY 110.79 109.96 Oil (Brent) 47.09 46.62
GBP/AUD 1.6797 1.6730 Gold 1218.0 12.1
        USD/NGN yesterday’s close   465
             
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Firstly, apologies for not writing this commentary over the past few weeks.

So….shock (1) BREXIT soon followed by (2) TRUMP…and as you know things happen in 3’s so could (3) be the start of the EU breaking up as we know it. As you are aware Italy is holding their own referendum (constitutional reforms) on the 4th December. The vote is centred on complicated legal changes to Italy’s constitution that would, in effect, make it easier for any ruling party to pass laws and weaken the power of the senate, the upper chamber of parliament. Those in favour of the changes say the change is necessary to allow Parliament to pass large and necessary economic and political reforms which to date have proved an almost impossible task. As things stand the no camp is leading but as usual it’s the undecided voters that will sway the result. As far as the polls go, well you know what the polls predicted for (1) and (2) and how badly they got mauled. Current Italian PM Renzi has stated he will resign if he loses, though he has since retracted this statement for the good of the referendum. I guess he saw what happened to ex-PM Cameron who made the same comments. A loss for Renzi could trigger an early general election (elections are in 2018), delay crucial reforms and set in motion advanced political chaos at a time when the Italian economy is still gloomy and investor confidence and public debt (not to mention the precarious banking system) battered. In other words dear friend, dark clouds are looming over the horizon and another battering for the “establishment” is looking more likely.

 

Brexit: nothing new really apart from the Supreme Court ruling and the EU saying much of the same, if the UK want free trade they must in part allow free migration. In other words, nothing new though the ruling by the Court will be a major factor on how easily or quickly for that matter the Conservatives and PM May can get Brexit started. Was it a surprise to learn from Sky News re the leaked memo that the Government don’t have a clue how to proceed with Brexit? Absolutely not. After 40 years of being in the EU how does one start to untangle the web of laws that are so ingrained and entrenched in our daily lives. I was not surprised either to read the +- £100bn black hole that the Treasury will have to plug post Brexit. I am afraid that those people that voted YES didn’t really take into consideration who and how the government was going to cope with the reduced income. Tel you what, cut benefits, cut foreign aid, cut building projects (HS2), cut spending and turn the UK into an economy like Benin. That will stop people wanting to come over and work and invest. Job done.

Lastly, in case you have not seen the USD has had a monumental rise since the US elections rising to trade at EUR1.0600 … seems Trump is not such a bad guy. The FOMC hold their final meeting on 13/14 December and following up from Pres. Yellen’s comments on 2nd November the financial markets are preparing for a rate hike (+0.25%). I have written previously I think they could actually raise rates more than 0.25%, but then again I was also assuming that Ms Clinton was going to win. With a Trump win, the FED are likely to take a more cautious approach and thus 0.25% is the more likely scenario. As regards the coming months we are now fully expecting the USD to break through PARITY and continue its merry way.

As for the GBP … holding up around 1.24 vs the USD but for how long. At some stage the bottom will open up and like the EUR, the GBP will start to weaken. However we are likely to see the GBP (potentially) remain buoyed vs the EUR and the 2 fall in unison vs the USD. USD is king, long live the USD.

Have a great weekend

 

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20161031 – DAILY FX COMMENT

  High Low     High Low
EUR/USD 1.0993 1.0953   USD/ZAR 13.86 13.69
GBP/USD 1.2218 1.2170 GBP/ZAR 17.03 16.68
EUR/GBP 0.9027 0.8988 USD/ILS 3.8711 3.8211
GBP/EUR 1.1126 1.1078 S&P 500 2136 2122
USD/JPY 104.97 104.39 Oil (Brent) 50.77 50.23
GBP/AUD 1.6141 1.5990 Gold 1279.0 1273.0
        USD/NGN yesterday’s close   470
             
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Hope you all had a good weekend.

If you thought Brexit was all about lies and deceit welcome to US election politics. What a dirty ugly campaign we are witnessing. Regardless of your vote, what the FBI pulled last week was properly dirty. Totally unnecessary and the timing could not have been more arrogantly obvious. After Ms Clinton appeared to be running away with the gong, the FBI and their Director (who happens to be a Republican and Trump supporter) decided to “re-open” the can of worms. Been there done that. Ms Clinton has already dealt with her emails, none of which were deemed to be a national security risk. So it is not hard to see why the FBI decided to launch this new round of email investigation? Was it in order to make the playing field a little more interesting with just a week to go? As far as I am concerned nothing has changed and there is nothing new (not that I have read the 650k emails) to derail who I believe should be next President of the United States.

On Friday the US commerce Department announced that the US economy expanded at an annualised 2.90% in Q3, the fastest in 2 years. I am jealous, as those were the numbers the UK were at pre 23/06. Alas that’s gone up in smoke. Anyway, if you were not aware, tomorrow and Wednesday the FED are meeting to decide on monetary policy. I am cautiously optimistic that the FED will stand down and do nothing with only 6 days to go to elections. While the FED are of course independent and do what they please, I do not think they would ever play into the politicians hands and rock the boat by changing interest rates (monetary policy) and make comments aimed at derailing either of the candidates. So come Wednesday eve, I think the Pres of the FED will choose her words carefully citing December as the next possible date to decide. As you have read previously, I still think there is a good chance the FED will hike 0.50% and by doing so set the tone for the USD and US economy going into 2017. It is a gamble, but what a statement they would make if they did. The US economy is vibrant and cooking on all cylinders. We are open for business. Granted data between now and then must continue to shine.

Friday saw the USD sell off following the revelation by the FBI but has since recovered somewhat to trade at EURUSD 1.0950 and GBPUSD 1.2180 at the time of writing. What is pretty certain amongst traders and investors is a Clinton win will provide more clarity and security with regard to national interests, foreign policy and trade negotiations. The clear uncertainty that will prevail should Mr Trump win is simply too much to bear. Can you imagine for a moment Ivanka and Donald Jnr running around the White House carrying “The Football” (for those of you who are unaware I am not referring to an oval ball used in the NFL). If you thought Brexit was a mess, my gosh a Trump win will send financial markets into a tail spin. I just cannot bear to think of that.

Reports over the weekend that the Governor of the BoE could step down and return to Canada. First of all that would be a major catastrophe and one which would send the GBP into freefall. If you read the story in the Daily Mail and viewed the comments I was utterly mortified and horrified by the sheer hate by the majority of the 4k or so comments. Right wing nutters who know practically zero about what it takes to be a Central Banker or more importantly how to manage monetary and fiscal policy of an economy the size of the UK. It worries me just how ignorant and deluded so many people are and these are the same people that voted Brexit. Honestly it is simply shameful.

For the coming week I think the USD will probably trade sideways as the FED announce their decision on Wednesday and the debates for Clinton and Trump continue at full force. As far as the GBP is concerned, my views do not change…small recovery followed by stronger sell offs taking us overall to lower big figures.

Have a great week ahead

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20161020 – DAILY FX COMMENT

  High Low     High Low
EUR/USD 1.0980 1.0952   USD/ZAR 13.92 13.80
GBP/USD 1.2299 1.2262 GBP/ZAR 17.10 16.94
EUR/GBP 0.8940 0.8920 USD/ILS 3.8414 3.8216
GBP/EUR 1.1211 1.1186 S&P 500 2150 2141
USD/JPY 103.78 103.33 Oil (Brent) 53.22 52.82
GBP/AUD 1.6032 1.5877 Gold 1273.0 1268.0
        USD/NGN yesterday’s close   455
             
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Today we will find out how the UK’s Retail Sales numbers faired for September. Analysts are predicting +0.40% from -0.20% in August. Let’s not get ahead of ourselves here. The rise (if it comes out as expected) is the result of the mini tourist boom since the GBP collapsed 20%. Retailers have been reporting mixed results of late with the likes of Burberry up 30% and while Ryanair down 5% and Foxton’s 34% all pointing to the weak GBP being the reason. Barclays reported in the daily Global Macro that “The UK labour market continued to show resilience in August, with the lowest unemployment rate since September 2005 and core wage growth hovering around 2.2% since October 2015. We expect Brexit to push up unemployment only gradually, likely at the turn of the year, and prevent upward wage growth pressures from building, thus forcing households to be more prudent and reduce private consumption by end-2017.” In my commentary yesterday I noted that with inflation heading to 2% (and the rest) net income amongst households will fall resulting in a change in shopping habits amongst consumers. As wages stagnate (and potentially fall in real terms) and companies put investments on hold, consumers will become aware of the changes to their incomes pushing up demand for benefits and further straining the Treasury.

PM May will announce to the EU (today) that there will be no second referendum on the UK’s EU membership. EU President Tusk has noted the UK’s future relationship with the EU will not be on the formal agenda but will give the PM the opportunity to set out the “current state of affairs in the country” over coffee. Coffee …. Ha ha is that the best the UK can do now. Oh how the mighty have fallen. In other words it proves just how far down the UK is on the priority list for the summit (& EU).

The decision by the UK’s Treasury to allow pensioners to sell their pension annuities has been scrapped by the Government amid warnings it could have turned into a mis-selling time bomb. Or is it a case that PM May wants to distance herself even further from Mr Cameron and Osborne’s policies. With every passing day the PM is tearing up all the good work the former leaders achieved and which sent the UK to the top of the global GDP tables. With one swipe of the pen, we now find ourselves heading towards numbers the likes of Zimbabwe. So where to from here you might ask…the simple answer is probably lower but then again anything can change that. Overall we know what will happen when Article 50 is invoked and we officially leave the EU. We know the EU will not give us a handout without safeguarding their 27 members. While the GBP managed to rally from 1.2150 Monday to 1.2350 yesterday, we now await the next round of comments. What is certain is all the recent bad news has been blamed squarely on Brexit and rightfully so. What a shame really as things we scootering on by so nicely and everyone was feeling perky and spending. Now that’s all changed and businesses and consumers are feeling worried (the remainers). The leavers well they will simply not admit to anything. It’s a lie and scaremongers didn’t you know !!!

 

 

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20161018 – DAILY FX COMMENT

  High Low     High Low
EUR/USD 1.1026 1.0994   USD/ZAR 14.18 14.10
GBP/USD 1.2274 1.2174 GBP/ZAR 17.33 17.13
EUR/GBP 0.9033 0.8981 USD/ILS 3.8462 3.8103
GBP/EUR 1.1135 1.1071 S&P 500 2137 2126
USD/JPY 104.07 103.67 Oil (Brent) 52.35 51.84
GBP/AUD 1.6022 1.5917 Gold 1262.0 1253.0
        USD/NGN yesterday’s close   460
             
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BIG day today data wise for the UK. CPI – a measure of how much prices have risen for September. Analysts are expecting +0.9% from +0.6% YoY which really is in line with what we are thinking given the 15-20% fall in GBP.

I am an avid reader of the newspaper The Daily Mail. I often get involved on the comments section (my handle is doubletot in case you were wondering) writing my views and comments on articles published online (those related to the GBP of course). Honestly having been in the markets for over 23 years and traded during some of the most volatile periods in our history it makes me laugh (and cry out loud) AT SOME OF THE STUPIDEST AND WEIRDEST COMMENTS I HAVE TO READ. Basically people are saying that the price rises are the result of the greedy bankers and corporates who are taking advantage of the current rate of exchange as well as the incompetent BoE Governor Carney (who they say only looks after the banks/bankers/funds). Seriously are these people totally demented? They further state that the GBP was overvalued to begin with and it is the banks and hedge funds (and BoE) that have driven the GBP lower rather than Brexit. Seriously!!! The GBP was nowhere near overvalued and given that the UK was the fastest growing economy (excl China India etc.) pre referendum, it was pretty fair to say the rate at 1.50 was spot on. In fact had we voted to Remain the GBP would currently be trading in the 1.47/1.52 range in my opinion after the US delayed raising rates in September.

We (the remainers) and I who wrote repeatedly that a leave win will send the GBP to 1.25 and send prices sky rocketing. We were not trying to scare people, we were telling it as it was. And so it came to pass that leave won and here we are. Marmitgate petrolgate pricerisegate you name it, the simple fact is the UK is a net IMPORTER and therefore the fall in the GBP has resulted in the higher costs for gasoline companies and food/manufacturing companies to bring their goods onshore. These higher costs are now being re-directed to the consumer who will find their take home pay cheque shrinking. We WARNED BREXIT followers. They never listened and now they blaming everyone else for the higher prices rather than themselves for being so short-sighted. I am still in denial at the prospect of leaving the EU. How has this happened? Why has this happened? How was it allowed to happen? While I certainly do agree with some of the issues surrounding Brussels and immigration there were other ways we could have tackled those issues. Unfortunately it was not to be and we now find ourselves paying £1.16l at the pumps not to mention the price rises in food and clothing. It is no wonder foreigners are flocking to the UK to buy goods and property. They are 20% LOWER than 23 June. Remember when the GBPUSD hit 2.11 and we all flocked to the States laughing how cheap Ipad/phone/clothes/hotels were. Swings and roundabouts and now it’s happening to us. The extra spending by the tourists will help retailers but certainly not fill the gap left by locals who have tightened their belts. Retails already coming out saying how bad things are and talk is another BIG name on the high street is going to throw in the towel. Well done Leavers and well done to our new PM (for pressing ahead for a hard Brexit). Oh what I would do to have Mr Cameron and Osborne back again. I miss them.

So on this fine Tuesday morning ladies and gents I would like to welcome you to GREATER rip off Britain. Make sure you keep your job, tighten your belt, hold back on buying unnecessary items and start saving.

With the impending release of the CPI number, the GBPUSD has rallied (if you can call it a rally) to trade at 1.2250 and EUR GBP 0.9000 (GBPEUR 1.1111) …. The reason is with CPI rising the logical thing would be to raise interest rates. However with the economy likely to shrink from 2.8% GDP to 0.80% next year the Governor is absolutely right and should leave rates where they are until things settle down. Exporters are high fiving each other so that should help short term…but and as I said in my comment on the DM – the UK is a net importer of goods and services, and therefore companies will simply have to raise prices which will be passed on to you and I – or what refuse to pay the higher prices and risk going out of business?  I think you know the answer to that question.

My favourite saying whilst living in South Africa was “kak and betaal” which simply translates into “cough and pay” – I reckon that says it all.

Regards

 

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20161011 – DAILY FX COMMENT

  High Low     High Low
EUR/USD 1.1142 1.1117   USD/ZAR 13.94 13.75
GBP/USD 1.2379 1.2275 GBP/ZAR 17.16 17.00
EUR/GBP 0.9046 0.8996 USD/ILS 3.8016 3.7758
GBP/EUR 1.1116 1.1055 S&P 500 2167 2159
USD/JPY 104.07 103.56 Oil (Brent) 53.36 53.06
GBP/AUD 1.6333 1.6232 Gold 1262.0 1255.0
        USD/NGN yesterday’s close   477
             
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More of the same really. Another terrible day at the office for the Pound. Teetering around 1.23 (USD) and 1.1050 (EUR) it seems there is simply no let up.

Ex-Governor of the BoE commented yesterday that the fall in the GBP was a good thing. Really? That’s news to me. The simple reason for his comments is the fall in the GBP is likely to send inflation spiralling towards 3% which is what the BoE have been trying to do for years. Basically we have already been warned that petrol prices, food and clothing prices are likely to rise between 10-15% over the coming months as retailers pass on the higher cost of goods (to import) onto the public at large. Best you go and stock up your fridge and but some jerry cans to horde fuel. Welcome to higher prices and even more rip of Britain. What makes me laugh out loud is the so called scaremongering was passed off as hearsay and a storm in a tea cup. I am afraid this was not scaremongering this was fact. The BoE, IMF, FED, ECB and World Bank all came out pre referendum and said a Brexit vote would be catastrophic for the UK. And so it came (coming) to pass. All those people that voted leave are now responsible for what is about to happen in this country. We are slowly but surely becoming a pariah state. I have no doubt in my mind that the EU are going to deal a terrible hand and heavy hand when negotiations actually start. You see you simply can’t beat the EU. They are absolutely right in there comments that if the UK want a hard Brexit – they will get one and then some.  After all the EU want to scare other EU states in thinking that leaving the EU is a good thing. No wonder Greece stayed!!

The coming months are going to continue bringing extra strain on the UK economy and what worries me is the hard Brexit will cost the Treasury 10’s of billions of pounds in loss revenue from taxes. What I fail to understand is why Brexit Secretary Davies and the PM are categorically saying that MP’s will have no say in the negotiations are even ratifying the decision to leave the EU. I bet they are worried the vote will turn out quite different to the electorate. For once I totally back Ed Miliband and his call to have MP’s involved. He and his backers are absolutely right.

Wishing you a good day ahead

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20161010 – DAILY FX COMMENT

High Low High Low
EUR/USD 1.1207 1.1169 USD/ZAR 13.91 13.75
GBP/USD 1.2445 1.2374 GBP/ZAR 17.29 17.06
EUR/GBP 0.9032 0.8988 USD/ILS 3.8369 3.7653
GBP/EUR 1.1126 1.1072 S&P 500 2161 2152
USD/JPY 103.41 102.80 Oil (Brent) 52.08 51.47
GBP/AUD 1.6434 1.6255 Gold 1265.0 1255.0
USD/NGN yesterday’s close 475
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It really comes as no surprise that the GBP has been brutalised. Call it fat fingers call it “black box” selling call it what you like, the fact is the GBP was always facing brutality and round 2 has now happened. We correctly predicted back in June that if Brexit happens the GBP will fall to 1.25 and fall it has.

I mentioned many times in this commentary that what I found very strange during the referendum was the complete absence of the then Home Affairs minister Ms May. It all makes complete sense to me now. PM May was a LEAVE campaigner. I therefore have no doubt that ex PM Cameron probably asked Ms May to “take a back seat” in return for her being made PM should Brexit happen, or if not then PM once Cameron resigned ahead of the 2020 election. Pure political give and take. And so it would come to pass that Brexit happened and Ms May became PM May. With the dust settled Ms May has now started to play hard ball with the EU promising a hard Brexit. Promise as she “May” the EU have fought back saying if the UK want to control immigration then we will lose access to 500 mio potential customers. The UK cannot have one foot in and one foot out. It is all or nothing. So the markets responded to this rhetoric and smashed the GBP into the gutter. Have some of that.

With the UK a net importer of goods and services the weak GBP will wreak havoc with GBP and send the economy into freefall over the coming years. Ignore the current numbers as they mean nothing. I say that because as things stand we are still a member and enjoy the fruits of EU membership. Once Article 50 is announced and we start to lose access to the EU market then we can start to evaluate the severity of Brexit. It pains me still that 17.4mio people voted leave thinking they would be better off. How. How on G-D’s beautiful planet is that possible? You see as an importer of goods and services the weaker GBP is going to hurt every man women and child in this country. Prices WILL HAVE TO RISE STEEPLY as companies pass on the higher costs to their clients – you and I. To add to this, there are over 700,000 jobs that are currently open but which UK citizens refuse to accept as they believe they are not within their standing. Vegie and fruit pickers, bar and restaurant staff, supermarket packers, cleaners, security and other “lower” pay jobs. So tell me PM May who will fill the void once the process begins. Of the 3.5mio EU citizens working in the UK the majority will be allowed to stay. But what about generating NEW JOBS and expanding. Where will that sea of labour workers come from? Certainly not from here as low income families will prefer to bleed to country and stay on benefits. Why on earth would you wake up at 4am to pick carrots at £6.70/hr when you can get that and more in benefits? Why on earth would you wake up at 4am to get a bus (at a cost) to go clean a hotel (not to mention having to find someone to look after your kids at a cost). You get my point I am sure. Low income better benefits > low paid minimum wage jobs. And that my dear reader is why the UK is heading into the South Pole and be frozen out. Just writing this sends a cold chill down my spine.

On a separate note Friday saw the US publish NFP – 156k (lower than 167k expected). The number while in line with what we were expecting still leaves me thinking that come December the FED will go ahead and raise rates. If Hilary wins I think that will help the FED’s cause and I still think the FED will surprise us all and hike 50bps starting a USD rally that will take us into 2017 and set the tone and lay the groundwork for EURUSD – PARITY  (1.00:1.00). As the USD rallies the GBP will suffer a double whammy, Brexit consequences and a USD rally. I cannot see any good news coming down the line.

Hope I have not ruined your week..

 

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20160922 – DAILY FX COMMENT

  High Low     High Low
EUR/USD 1.1248 1.1184   USD/ZAR 13.62 13.37
GBP/USD 1.3087 1.3027 GBP/ZAR 17.77 17.46
EUR/GBP 0.8604 0.8574 USD/ILS 3.7791 3.7505
GBP/EUR 1.1663 1.1623 S&P 500 2166 2160
USD/JPY 100.85 100.09 Oil (Brent) 47.71 47.05
GBP/AUD 1.7151 1.7040 Gold 1336.0 1331.0
        USD/NGN yesterday’s close   429
             
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Oil prices rose around 1 percent on Thursday, extending gains from the previous session after a surprise third consecutive weekly U.S. crude inventory draw tightened the market.

South Africa’s rand firmed to its highest in four weeks against the dollar on Wednesday, helped by strong appetite for high yielding emerging market assets as investors anticipate low U.S. interest rates low for longer this year. South Africa’s headline consumer inflation dipped below the top end of the central bank’s target in August to its lowest in nine months, data showed on Wednesday, suggesting interest rates would remain unchanged at today’s monetary policy meeting.

Nigeria; Interest rate cuts alone will not help to pull Nigeria out of a recession amidst rising inflation, the country’s central bank said on Wednesday.

I TOLD YOU SO!!! Yes I was right. The FED held FED rates steady at 0.50% at their meeting last night. Just like I have been saying for a couple of weeks (while a number of VERY well-known financial institutions were calling for a 0.25% hike). Simple, stick with ParityFX J

While agreeing that the case for a rate rise had strengthened, Yellen argued that it made sense to put off a move for now amid signs that disillusioned Americans who dropped out of the labour market are returning and looking for work. “The economy has a little more room to run than might have been previously thought. That’s good news.” Additionally the FED was accused by presidential nominee Donald Trump that Yellen is deliberately keeping rates low to help make President Barack Obama look good in his final year in office. When asked about such accusations, Yellen repeatedly disputed that political considerations played any role in Fed decisions. “We do not discuss politics at our meetings and we do not take politics into account in our decisions,” she said. I can tell you one thing for certain, whatever Mr Trump says simply divide by infinity and then multiply by 0. Hot air and some TV air time. The FED is 100% independent and makes their decisions based on the state of the US economy and not to satisfy a political party.

Ms Yellen also made clear that the FED still intends to raise rates this year. “I would expect to see that, if we continue on the current course of labour market improvement and there are no major new risks that develop,” she said. Now this is where it gets interesting…the FED also scaled back the number of hikes it expects next year, from 3 to 2. Regarding this year then there are 2 remaining meetings, November and December. I think given the former is right by the US elections they would prefer to hold back and do nothing. So that leaves December where I THINK if things continue as they are and the economy regularises (and inflation picks up towards 2%) the FED will surprise the market and hike 0.50% – that will kill 2 birds with one stone and their job will be done for 2016 – 1% hallelujah.

Now some BREXIT news and I quote directly from an article by Bloomberg which says it all, “Global investment banks are throwing in the towel in the battle to keep London the home for clearing of $570 billion of euro derivatives. Executives tell Bloomberg’s they expect France or Germany to prevail in the tussle once Brexit is underway and are making plans to cope. While it might take years for the transitions to happen, jobs and operations central to the clearing function will be among the first moved to the continent once the U.K. triggers its withdrawal from the European Union, one person said. It would mark a defeat for Chancellor of the Exchequer Philip Hammond, who pledged this month to seek to protect London’s status as the epicentre for European trading in interest-rate swaps, accounting for about 39 percent of the global market. European Commission Vice President Valdis Dombrovskis, the bloc’s financial-services chief, today reiterated that the U.K. faces a choice between imposing immigration controls and letting its financial firms continue to trade freely with the EU.” I have said this all along. The economic numbers you are seeing today have absolutely NO REFLECTION of what’s going to be like once we invoke the Article. That’s when the proverbial cat’s hairs hits the fan. I am just waiting for the day that happens and the EU tell the UK to take a hike. PM May as much as I admire her and her comments that the EU will HAVE to agree to terms of trade with the UK….I think she is dreaming. Prepare for a terrible and tough generation. You have been warned. Pity you voted Leave!!

 

 

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Opinions expressed are subject to change without notice and may differ or be contrary to the opinions or recommendations of ParityFX. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. To the extent permitted by law, ParityFX does not accept any liability arising from the use of this communication.

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20160913 – DAILY FX COMMENT

  High Low     High Low
EUR/USD 1.1242 1.1225   USD/ZAR 14.38 14.20
GBP/USD 1.3342 1.3312 GBP/ZAR 19.16 18.93
EUR/GBP 0.8434 0.8417 USD/ILS 3.7768 3.7515
GBP/EUR 1.1881 1.1857 S&P 500 2161 2147
USD/JPY 102.04 101.41 Oil (Brent) 48.57 48.11
GBP/AUD 1.7705 1.7605 Gold 1332.0 1327.0
        USD/NGN yesterday’s close   424
             
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FED member Lael Brainard did not disappoint the Doves by stating in a nut shell the case to raise US interest rates is “less compelling” arguing that US inflation was not where near the FEDS target of 2%. This helped stocks reverse their earlier morning’s falls. European stocks opened up 0.50% higher this morning as a result with the USD trading softer across the board.

Federal Reserve Governor Lael Brainard argued for a cautious approach to raising rates, abating worries about higher rates sparked by another Fed official last week. As I wrote yesterday some investors were worried that Brainard could change her stance and move towards a hawkish stance thus adding conviction that a US rate hike was on the cards. As things stand then there has been no real change and now as the blackout begins (no FED news) we simply have to wait until the 21st to see if they will or won’t hike rates. As I have said time and again my view is the FED should wait until at least December allowing the dust to settle post US elections and more importantly allow another 3 months for data to confirm the “true” state of the US economy (in the face of Brexit and China). I have further stated that I think if data does continue to shine at the current rate, there is a strong case for the FED to hike by 0.50% (rather than 0.25%) and thus fulfil their desire to raise rates to 1% by close of 2016.

What could help the FED’s case for hiking 0.50% in December is an improvement in China’s economy. After a sluggish July, China’s Industrial Production rose to 6.30% from 6.00% (YoY). In other words if this improvement continues for the next few months coupled with small rises in US inflation there will be a very strong case for the FED to hike (surprisingly to many) by 0.50%. What a strong message this will give the market and in so doing send investors clamouring for USD (assets) and setting the tone for the USD (FX) for 2017. We all expect the USD to hit PARITY and a hike of this nature could be the tonic that sets the currency moving in this direction. Oil seems to be finding strong support in the $47.50p.b area and should prices continue to tick higher this will help the US achieve their inflation target. So I guess you can see where I am going with all of this. Hike 0.50% in December on the back of improvements in US NFP, higher oil prices and solid China data.

As far as the GBP is concerned, we saw a late rally yesterday as the currency floated through 1.33 handle. We continue to trade around these levels this morning with GBPEUR trading around 1.1860 and looking less pressured on the upside. Regarding Brexit, the Government has basically announced they will not be keeping a running commentary on how negotiations are going. Of course there will be leaks but I doubt there will be officials updating us on the progress. The reason is the information could have serious consequences for financial market volatility so staying away from the press is the safest option. PM May stated “The new relationship will include control of movement of people from the EU to the UK, and it will include the right deal for trade in goods and services, it would not be right for me or this government to give a running commentary on negotiations”. What we have heard over the weekend though is British citizens may have to apply for a visa (and pay of course) to visit the continent (EU states). Unreal!!! We have just gone back 50 years. So much for progress and putting a man on the moon. Furthermore (as I mentioned yesterday) Leave camp dropped one of their KEY pre referendum pledges £350mio extra a week spent on the NHS (money diverted from the EU to the NHS). MPs have now demanded the group admit the lie (I said this yesterday) and apologise (waste of time) or justify the transfer and when it will happen (never!!). Lies – lies and more lies that what the Leave group campaigned and unfortunately 17.4mio people lapped it up. I am lost for words.

A number of high profile EU members have already announced the UK will not find it easy at the negotiation table. Emmanuel Marcon (French Economy Minister) said the City’s “Passporting rights” would not be preserved unless the UK contributes to the EU budget and no concessions on freedom of movement while Danish PM Rasmussen told Bloomberg he was urging his colleagues not to give Britain a good deal. Honestly, be prepared for outright gun slinging and an almighty punch up (not literally). The UK is about to be taught a very tough lesson on the consequences of jumping ship and not allowing women and children to occupy the first life boats. Prepare to start swimming in open water ladies and gents…the sharks are circling!!!!

 

 

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Any financial promotion contained herein has been issued and approved by ParityFX Plc (“ParityFX”); a firm authorised and regulated by the Financial Conduct Authority (“FCA”) as a Payment Services Institution with registration number 606416.  It is for informational purposes and is not an official confirmation of terms.  It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to.

Opinions expressed are subject to change without notice and may differ or be contrary to the opinions or recommendations of ParityFX. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. To the extent permitted by law, ParityFX does not accept any liability arising from the use of this communication.

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20160912 – DAILY FX COMMENT

  High Low     High Low
EUR/USD 1.1264 1.1228   USD/ZAR 14.48 14.36
GBP/USD 1.3286 1.3250 GBP/ZAR 19.24 19.04
EUR/GBP 0.8484 0.8458 USD/ILS 3.7871 3.7231
GBP/EUR 1.1823 1.1787 S&P 500 2129 2101
USD/JPY 102.72 102.17 Oil (Brent) 48.28 47.18
GBP/AUD 1.7660 1.7559 Gold 1330.0 1324.0
        USD/NGN yesterday’s close   424
             
Please get in touch with us if you need the latest USD/NGN price  

With the impending FED meeting “around the corner” global stock markets have been hit hard today with stock markets down between 1.00-1.50% depending where you invest. FTSE down 1.3%, DOW 0.75% Italy 2% as investors fear the FED will ignore recent poor data and hike rates. The only saving grace is later today FED member Lael Brainard who is an avid wait voter is giving a speech with investors waiting to see if she gives any clues as to how the FED will vote on the 21st September. MS Brainard is a “Dove” so if she changes her rhetoric in any way and leans to a Hawk, then its game on and in all probability the FED will go ahead and hike. I am a Dove myself and think the FED should wait regardless and wait for further confirmation on how the US economy is fairing (including Inflation and NFP). If the FED chair wants to increase the market probability of a rate hike then having a Dove speak like a Hawk is the best opportunity to confirm a rate a hike is on the cards. From tomorrow the FED goes into information lock down (Blackout) so all eyes will be on the speech later today. FYG the speech is scheduled for 1.15 EST.

Despite the great UK PMI numbers the GBP was hit hard late last week on disappointing data (and US rate hike risk) sending the GBP to the cleaners. In addition this morning the British Chamber of Commerce (BCC) announced they have slashed the UK’s GDP growth for next year to 1% from 2.30% citing post Brexit fears and uncertainty (and rightfully so). How many times have I commented on this issue that when the time comes and we start to negotiate the terms of Brexit the EU will go for the knock-out blow and play hard ball. Already business investors have slashed spending and hiring sparked by the uncertainty that surrounds Brexit. What really annoys me is the Leave camp have now removed the promise of £350mio to the NHS (from the EU) from their manifesto (something that as you know was a key LIE on their bus). The fact that they lied to such an extent should in itself be reason to call another referendum. I cannot believe 17.4mio people fell for the lies. The Remain camp on the other hand told the truth throughout and already the damages are being felt. Importers have been hit hard, holiday makers are cancelling foreign holidays and hiring has come to a stop. And we have not even started negotiating the terms of our exit. PM May has told her cabinet to accept Brexit and get on with things. But can they really forge ahead in the face of untenable hardships around the corner. Why can’t she ask for another referendum now the cards are on the table? I am almost certain things would be very different this time round. While immigration is an issue even once the terms are agreed I am certain the EU will say to us if we want preferable terms of trade they must be accompanied by freedom of movement for the labour force. How can the UK expect to enjoy trading without the free flow of people? Just won’t happen!

This is what petrifies me going forward and why I think the GBP will get an almighty hammering once negotiations start. This will send the UK economy into a freefall and set us back 6 years. What a shame really after all the heroic work ex-Chancellor Osborne and ex-PM Cameron achieved. Don’t forget at one stage we were the fastest growing economy amongst Western Countries. Now we find ourselves categorised with the Greeks. Even Spain will grow faster than the UK.

So all eyes and ears will be pealed to the TV and radio at 6.15pm local time when Brainard speaks. One thing is for certain when I write this blog tomorrow morning I’ll either be in a good mood or bad mood. Either the GBP will be smoking above 1.34 or withering just above 1.31 (depending how the EUR gets dealt). It is too much of a tough call so I guess investors should simply wait in the sidelines and act once the news is out.

Good luck and let’s be careful out there today

 

DISCLAIMER

Any financial promotion contained herein has been issued and approved by ParityFX Plc (“ParityFX”); a firm authorised and regulated by the Financial Conduct Authority (“FCA”) as a Payment Services Institution with registration number 606416.  It is for informational purposes and is not an official confirmation of terms.  It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to.

Opinions expressed are subject to change without notice and may differ or be contrary to the opinions or recommendations of ParityFX. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. To the extent permitted by law, ParityFX does not accept any liability arising from the use of this communication.

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