I’ve spoken to a few clients and friends who are getting panicked about the continued market volatility, but I’m still not feeling what they are feeling. The way I see it, this is an inevitable consequence of the Federal Reserve trying to ween us off central bank largesse. The fact that other central banks are stepping in to negate this seems to be getting missed, or perhaps reconfirms the primacy of the US central bank. From the peak of the Global Financial Crisis in 2008, the Federal Reserve had embarked on an unprecedented programme of liquidity that financial market participants came to depend on. Indeed, one might argue the implicit support of central banks goes at least as far back as the LTCM collapse in 1998, you’ll recall the “Greenspan put”, if you don’t, please google it. That era is over now, the Federal Reserve clearly wants to back away from it, it’s a risky course, no doubt, but it is absolutely necessary if the global economy ever wants to put the crisis behind it. The panic we are seeing now is because financial market participants are afraid that the world isn’t ready for it, but the US economy is on a solid footing, so I have to ask.. if not now then when? As it happens, I believe the Federal Reserve is pursuing a rational course, it was never going to be easy to clamber out of the pit central banks are largely responsible for creating. From a technical point of view, I think that this sell off is close to exhausting itself, there are signs of positive divergences in a number of key indices, I see it particularly in the chart for the S&P 500. It looks to me that we are at a point where greed should be the modus operandi of the truly smart investor, as Mr Buffett has said in the past, “be fearful when others are greedy, and greedy when others are fearful”, smart words! It is however interesting to note, that the old dynamics are really starting to play their part again. In this recent flight to quality gold has rallied, as have both the Japanese yen and euro, this is normalcy I’m happy to see! For a while there gold in particular was an unloved asset, but perhaps it’s coming into its own again, a true safety asset.

On this basis, I am expecting the S&P to start rallying soon, and this could be a rally founded upon true fundamentals and not central bank inspired monetary largesse. This would be a clear sign of health. There are however huge risks, and as I said earlier there are dangers for the Federal Reserve in embarking on this brave but necessary course. It would surprise no one if they pull back from further rate hikes this year, as more tightening might be too much for the global economy, but if markets do become bullish again the Fed might quietly steel themselves and go for it. A bitter pill for the rest of us, but good medicine is never pleasing to take. I am also looking for EUR/USD to turn lower again, I am not sure what happens to the Japanese yen though, and USD/JPY.

This doesn’t mean that other assets will recover, there are very real problems facing the Russian economy, the Nigerian economy and frankly the oil & gas sector generally. But even that gloomy news has its own positives, you only have to look at how strongly the Indian economy is growing (even if the numbers are suspiciously good), to see how oil importing economies are benefitting from lower energy costs. I expect cheaper oil to be the backbone of a possible reacceleration of growth in the US later on this year. Going back to Nigeria though, the situation gets worse and worse. Yesterday the naira saw another record low (see the chart below). In the absence of a credible FX policy and constructive economic policies in general I don’t see this trend improving.

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Good morning

I told you so!!

Seriously I really did. The big news President Yellen’s (FED Chairwoman) confirmed what we have been saying for weeks now that the FED are on hold (and hinted she/they, the FED members) might have jumped the gun too early by hiking rates in December. As things stand you can pretty much rule out a March hike, with attention now focused on June/December. Having said that, be rest assured, if the markets continue to fall, NFP and US data continues to show 0 growth (including flat CPI) and China shows no sign of bouncing from the lows, the FED will skip June and perhaps wait till September before re-evaluating whether the time is right for a hike. I can tell you one thing, just like the BoE recently (hinted) that rates could FALL to stimulate the economy (in the UK), the FED would and could do the same and revert back to 0.00-0.25% range. Cast you mind back a few years, the ECB hiked rates by a 0.25% to 1.25% and at their next meeting having realised they jumped the gun too early cut rates immediately and have not stopped. Honestly, I am scared. Speaking to businesses and investors alike, there is an air of uncertainty and fear. Interest rates might be non existent but I can tell you right now, cash is king.

So what did Pres. Yellen say. “Financial conditions in the US have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar,” she said. The Fed chief added that if the turmoil continued it would act as a brake on the economy and affect the jobs market. Yellen cited the uncertainty in the Chinese economy, the possible impact of falling commodity prices on emerging-market economies and financial market volatility as potential risks to the US economy. The Fed chief said: “The economy is in many ways close to normal.” Specifically unemployment dropped below 5% , which many of her FED colleagues consider to be full employment, and that inflation was LIKELY (wishful thinking?)  to move up to 2%. “Against this backdrop, the committee expects that with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in coming years and that labour market indicators will continue to strengthen,” she said.

Additionally today President Zuma will give his “State of the Nation” address. As a good friend at a large S.A noted in his ZAR commentary this morning, “The Address is usually not a market-mover and typically only a small portion of the speech is given to economic policy. There is, nevertheless, unusually large market interest this time around given the economic and political environments and looming risk of junk status”. Furthermore he added, ” The expectation is that the speech will try and please everyone, with a popular tone contradicting pledges of fiscal conservancy to protect the rating — this is a political not policy speech after all. There will be the usual calls for national progress, teachers to teach and so on, and renewed pledges to sort out the state-owned enterprises (SOEs). We would be surprised if there are any direct references to tax hikes. Key issues to watch are: the nuclear plan, NHI, minimum wages, land reform (including restitution and redistribution), the size and productivity of the civil service, and private sector involvement with struggling SOEs. Overall, the State of the Nation Address is likely to be long on rhetoric but have no X-factor market-moving details — Zuma will talk the talk; Gordhan (Finance Minister) will have to walk the walk”.

Good luck and let’s be careful out there
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This evening the Chairwoman of the Federal Reserve, Janet Yellen, will make her semi-annual speech to Congress in which she will give her outlook for the US economy and discuss monetary policy. As I’ve mentioned in recent blogs, the greenback has been largely under pressure versus its peers since the start of the year (the euro is up 4% versus the dollar in 2016) as the market has reassessed the likelihood of further rate hikes in 2016. Increasingly the tough global economic climate and turbulent conditions for stock market’s sees investors more and more confident that the Federal Reserve will be unable to make further progress in its normalisation strategy, indeed many now think the US central bank erred by raising interest rates in the first place, and you can see this in the price action in the money markets. It is likely that Chairwoman Yellen will try to maintain the stance that the Federal Reserve took in December but with a more cautious tone about the outlook for the global economy and the likely impact on the US economy. Many top bank strategists are already looking at this testimony as a seminal moment for 2016. One thing is clear, if Yellen backtracks we could see a further large selloff in the dollar, I just find it hard to believe that institutional inertia will permit the Federal Reserve to give up so quickly.

There are a number of things that could change my view, we are seeing signs of systemic risk within the energy sector for example, as beleaguered corporates are under pressure coping with their outstanding debts while facing collapsing revenue, there are also worries about the contingent convertible bond market in Europe which affects European banks. Either or both of these issues could cause severe problems that could spill over into the wider economy and tip the scales back towards another Global Financial Crisis style panic. And don’t get me started about the mountains of dollar debt issued by Emerging Market corporates and the problems they’re likely to face as their home currencies depreciate. There is a lot to worry about, but I’m not a market fundamentalist, my focus will always remain squarely on the technical factors underlying the key charts that I monitor, and on that basis I am not yet ready to capitulate from my view that the longer term bull market that started in March 2009 is intact. We would need to see a lot more damaging price action for my view to change (perhaps another 25% decline in the S&P 500 would do it). In addition, from a bigger picture technical perspective, the bounce in EUR/USD is far from unexpected and it looks to me to be the final corrective wave up before the bearish trend (stronger dollar) reasserts itself. The only issue is that the corrective wave could easily take EUR/USD up to even the low 1.20s before running out of steam. At the moment the weaker dollar seems synonymous with negative risk sentiment so the implication is quite clear, and the fact that this could persist for weeks or even possibly months means that this could be an ugly and uncertain first quarter of 2016.

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The downward pressure on global stock prices has been relentless again in February, yet I continue to maintain that in terms of the bigger picture bull market there is still no decisive technical damage. This is what I see in my bigger picture chart…

You’ll note that the trend-line going back to 2009 remains intact, and indeed we have some ways to go before going below that line. As far as I’m concerned, even if we were to breach the trend line we would need to see the S&P index (above) fall below 1400, another 25% lower, before we could call an end to the post Global Financial Crisis rally. Despite my conviction it is clear that we are experiencing one of the most severe bouts of sustained negative bouts of risk sentiment since the depths of panic in 2009. You only have to look at how gold has rallied since the start of the year, or how much government bonds have rallied to appreciate that a substantial flight to quality is underway. Japanese 10 year government bond yields have now tumbled to zero, the first mid to long bond yields of a G7 nation to do so., a sign of market caution if there ever was one. I have noted one chart which might cause the Federal Reserve to proceed with some caution from where we are now…

This is the spread (the difference) between US 2 year Treasury bond yields and 10 year bond yields. The last time this spread went into negative territory preceded the Global Financial Crisis, and it is one of the best measures used to assess the tightness of US monetary policy. The Federal Reserve will not want to see this chart go much lower than it is, even though it is some distance away from negative territory, I don’t believe US policy makers are anywhere near the sort of conviction levels about US economic strength that a flatter yield curve implies. For now we hover around what has become a fairly significant support zone over the last 8 years so it is worth keeping a close eye on this spread. It’s hard to say what this all means for currencies, or more specifically, what it means for the US dollar. Typically a flattening yield curve is synonymous with a strengthening currency which is exactly what we’ve seen as the yield curve has tightened. I suspect that it will be tough for a continuation of broad based dollar appreciation from here. But let’s be clear, the dollar has actually weakened against some of its major rivals (EUR & JPY) so far this year. Emerging market currencies and the pound sterling continue to feel the pressure against the dollar but this has more to do with their idiosyncratic issues than actual dollar strength.

The former central bank governor of Nigeria recently made comments about naira policy, and he is spot on. “Unfortunately, because the exchange rate is right out there in front now, monetary policy is being seen as the barometer for broader economic thinking. It is sad that on this one policy you get it so wrong that you risk taking away attention from everything else you are doing.” Couldn’t have said it better.

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Good morning

The big news was no doubt the weaker than expected Non-Farm payroll on Friday last. Only 151k jobs were created vs the 190k expected. As you are well aware, FED President Yellen made a point of saying in December that further rate hikes in the US were going to be DATA DEPENDENT. Ouch!!! That data certainly was a low blow and adds fuel to my fire that the FED will in all probability (though what they do and say are 2 different things) delay hiking in March and look further down the curve. Some good news was the unemployment rate which did manage to fall to 4.9% …. however this was not enough the save the USD’s blushes.

Reading some comments from the major banks, they now appear to be talking the same rhetoric as me, and looking for rate hikes in June and December as opposed to March, June, September, December. I have been saying over the past few weeks the combination of a weaker global economy and weaker US data is forcing the FED to delay and slow down the rate hikes. They can ill afford to stick to their game plan and risk the economy falling back into recession after the sterling work they have accomplished over the last 5 years. While some commentators still argue for a another rate hike in March, Pres Yellen (I hope) will act as she has preached and delay the hike to June so that they (the FED) have more data (hopefully better) and the global economy has bottomed (wishful thinking). Its all to play for.

China’s FX reserves dropped $100bn to $3.23tn coming on the back of a $108bn fall. This fall, one can argue, was the PBoC attempt to stabilise the CNY in the “open” market. As I have previously argued, I think the PBoC will be happy to let the CNY devalue further and use their reserve arsenal to protect the CNY from attacks by the market. In other words, controlled devaluation. No doubt you are unlikely to hear any negative rhetoric from the likes of the FED, ECB, BoE, and BoJ against such a policy.

Last week we also saw the BoE announce their rate decision. What stood out of course was the vote. From 8-1 (against) members of the MPC voted 9-0 to keep rates unchanged. While the GBP rallied on the news (against the grain) I think it is fair to say traders sold the rumour and bought the fact. UK rates are not going anywhere and a report in Sky News actually spoke of a CUT in UK rates to help stimulate the economy. This story first appeared a few months ago when BoE members noted rates could ALSO be cut if necessary. The lack of inflation and wage growth continues to blight the UK economy and the soon to be announced EU referendum all adding to the pressure on the GBP and the BoE. Therefore as things stand, you can expect rates to stay at 0.50% for the next couple quarters with Q4 the time to re think that hike pattern. What I imagine is once it starts (rate hikes) they are likely to go up faster than had the Chancellor been able to raise them in Q1. Tighten your belts…As for the GBP, its torn between a weaker USD (GBP appreciation) and weaker UK economy/EU Referendum/Rate hike delay (GBP Depreciation).

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Big day today, with the US labour market report – nonfarm payrolls – coming out in the European afternoon. Economists are forecasting 190,000 new jobs created in January with the unemployment rate unchanged at 5%, this would be a decrease in comparison to the December number which was 292,000, but still a fairly healthy number. Recent FOMC minutes and Yellen speeches have shown that the focus of monetary policy decision makers will be on inflation indicators and the strength of the labour market. In recent weeks the markets have moved from pricing in a series of interest rate hikes in 2016 to moving towards a more dovish stance, however I still believe that the market might be getting ahead of itself. In recent memory there has been only one time where the Federal Reserve has actually cut rates while nonfarm payrolls have been showing robust employment growth. As I’ve mentioned in recent blogs it’s one thing to reprice the probabilities of Federal Reserve hikes and thus reassess the correct valuation for the greenback and quite another to start to expect the US currency to weaken significantly. Particularly as other central banks, and not the Federal Reserve are actively pursuing policies that look like they want to weaken their currencies. Look at the ECB and Bank of Japan with negative interest rates, the Peoples Bank of China cutting rates and permitting the official renminbi fix to weaken against the dollar and the Bank of England indicating that there are unlikely to be rate hikes in 2016, and indeed talking about how weak economic conditions are at the moment. The Federal Reserve stands alone in trumpeting the strength of the US economy and taking a pragmatic approach to assessing the effects of global risk sentiment on forward looking domestic economic activity. We might not see substantial dollar appreciation for a while, but there is no reason to believe that the dollar bullish trend is going to change materially from here.

The Bank of England interest decision came and went yesterday, and the most noteworthy outcome was the capitulation of the lone hawk. The voting in recent months has been stable with 8 on hold, and one for a hike. This time around all voters decided to keep interest rates on hold. I don’t think the minutes can be better described than the subsequent Financial Times article, “UK interest rate rise kicked into the long grass”. Governor Carney downgraded its inflation, growth and wage forecasts, clearly nothing is changing on the UK monetary policy front in 2016. Unsurprisingly GBP/USD was impacted by this, with the currency pair retreating from its recent bounce. Interestingly the retracement of the recent correction was almost exactly 50% of the recent impulsive move lower, we continue to believe that new lows are likely.

Across the channel, ECB President Draghi was unashamedly dovish in his speech, I quote “The risks of acting too late outweigh the risks of acting too early”. He was talking about the risk of a destabilising bout of disinflation. From a personal standpoint I really hate this type of talk…“If, on the other hand, we capitulate to inexorable disinflationary forces or invoke long periods of transition for inflation to come down, we will in fact only perpetuate disinflation.” You want to know who hates low inflation? Governments! Particularly governments with lots of debt who are trying to devalue the debt at the cost of their own citizens. You want to know who benefits when inflation is low or non-existent? You and me! And particularly pensioners who depend on fixed incomes, who see their spending power eroded when inflation is higher. I find it extremely frustrating that this narrative from central banks is never challenged by the 4^th estate but this is the world that we live in. I’ll stop my rant now…

On another note, President Obama proposed a $10 per barrel tax on oil. Wow! The oil majors must just love him! I’m not sure if he’s trying to lose Texas and the other oil producing states for the winner of the Democratic party nomination or whether the White House calculation is that the green vote is large enough to make the difference. Either way it’s never going to be enacted by a Republican led legislature but it does set a tone for future discussions. For now crude oil looks to have stabilised in the low $30s. From a technical standpoint $36.75 the recent high for Brent becomes a key level. My bias is to look at that level as a ceiling, and I expect new lows in the coming months. There is nothing about global demand and supply conditions that suggests it will be easy to see oil climb above there.

Back to today’s labour market data. This is potentially a huge number that could set the tone for the weeks ahead. If the number surprises to the top side it will show that despite recent market volatility the US economy continues to chug along at a healthy pace. However a data disappointment will give more strength to those who believe the Federal Reserve has made an error in hiking. The market could well move to test the resolve of the US central bank, were that to happen, and the dollar could weaken considerably. We will discuss the outcome on Monday. Have a restful weekend

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Yesterday was a bad day for traders/investors with long dollar positions as the dollar which started off the day on the back foot weakened in the afternoon after disappointing economic data in the United States. The ISM Non-Manufacturing PMI came out weaker than forecast and a clear drop from the prior number. It’s bad enough that US manufacturing has looked wobbly over the past few months, but for services to look less positive has dampened the enthusiasm of even the most hawkish economic forecaster, it certainly suggests that the weakness in the energy and manufacturing sector is now spilling into the service related sectors of the US economy. It’s worth pointing out that the ADP employment change data came out better than expected, but I suppose that watchers were in glass half empty mode and the relationship between the ADP data and the more comprehensive labour market report on Friday has always been patchy. It’s been a rather indifferent few weeks for the dollar against most developed market currencies and it’s not difficult to understand why. What with January being such a tough month for equity markets and growing doubts about the state of the global economy, the big question for those who believe in the bullish dollar trend has been, will the Federal Reserve pull back from its plan to normalise interest rates? The more indifferent US data we see the harder it becomes to justify the bullish case. And now here we are, a few days away from a non-farm payroll report which could easily turn out as a negative surprise. No one wants to standing for the dollar when the music stops, and so we got yesterday. Clearly a liquidation of sorts, whether it was just a case of position reduction or outright capitulation for some is hard to tell. My guess is that it was more about position reduction, either way the effect is the same.

The pound has been the one weakling which up until the last few days has not fared particularly well against the dollar, but a combination of stronger than expected services data in the UK and some uncertainty about quite what Governor Carney will say after today’s MPC decision has encouraged those who have maintained short cable (GBP/USD) positions to decide that discretion is the better part of valour. I certainly agree that the risk today with Carney’s speech is that he may not sound quite as pessimistic about the UK economy as he has been in the past.

To me all of this stuff is trading noise. It all boils down to one thing for me, the US seems to be the only major economy which isn’t actively trying to weaken their currency. We all know what the Chinese are doing, the Japanese just took rates negative joining the Europeans, and the Brits have made it clear that rates aren’t likely to go up this year. So we can have periods like this which I would characterise as position cleansing, but when all is said and done, are you going to hold on to currencies that are trying to weaken or the one that doesn’t seem to care? I know what I want to do!

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Morning

Some headlines from Africa:

WORLD OIL PRICES : Oil futures extended losses into a third session in Asian trade on Wednesday, as U.S. crude stocks last week surged to more than half a billion barrels and as Iran plans to boost exports from March.

SOUTH AFRICA MARKETS : South African stocks closed lower for a second consecutive day on Tuesday as demand for high-yielding assets declined. The rand also weakened.

KENYA MARKETS : The Kenyan shilling held steady against the dollar on Tuesday while shares eked out meagre gains.

NIGERIA : Nigeria, reeling from the oil price plunge that has slashed vital revenues, has asked the African Development Bank for a $1 billion loan to help fund an increased budget deficit, the AFDB said on Tuesday. Additionally, Nigeria’s central bank told commercial lenders to fund their naira accounts on Tuesday to be able to participate in a currency intervention on the interbank market on Thursday, traders said, citing a message from the regulator.

Yesterday I mentioned that FED member Fischer noted the recent global turmoil will give the FED some reasons to delay hiking rates (in March). Today another member of the FED, Ms George contradicted Fischer and said “While taking a signal from such volatility is warranted, monetary policy cannot respond to every blip in financial markets. The recent bout of volatility is not all that unexpected, nor necessarily worrisome, given that the Fed’s low interest rate and bond-buying policies focused on boosting asset prices as a means of stimulating the real economy.” Looks like we have a good old “war of words”. While I agree with Ms George, I still believe the FED should delay a rate hike until such time the market has calmed somewhat. If you cast your mind back to October when Pres. Yellen delayed hiking citing market turmoil in China, surely one could argue what we are going through now is much of the same. What’s the rush? Rather wait and see. This Friday’s NFP will help the FED to decide, and if the analysts are correct and the number is sub 200k you would think this is reason enough to hold off (January was +290k).

BoJ Kuroda said yesterday the BoJ are ready to reduce rates (currently -0.10%) more if needed. Already reeling from the shock announcement last week, the market is viewing this as a positive sign that the BoJ will do what it necessary to stabilize the Japanese economy. Fighting talk.

GBP continues to rally though I believe this rally to be short lived and on the back of profit taking. The news is out re UK interest rates. I believe over the comings days/weeks we will in all likelihood see a resumption of the sell off in the GBP vs the USD and EUR.

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Morning

Markets been on the back burner awaiting news and events following the ECB/BoE/PBoC/FED meetings.

Emerging markets have had a better day and the talk is investors have been climbing back into the carry trade (JPY/ZAR) after the SARB raised rates last week by 0.50% to try fend off inflation and fight the current account deficit.

This week sees the ECB and BoE interest rate decision on Wednesday/Thursday (no change) respectively and NFP on Friday (January count was +292k). Analysts expect this week to see a rise of 190k given the recent poor data that we have seen out of the States. Not wanting to repeat myself, but as Pres. Yellen of the FED announced in December, further rate hikes will be (including) DATA DEPENDENT and therefore the latest “disappointing” number will and should delay near term rate hikes (many expecting the next hike in March). If China continues to slow, oil trades at around and below $30pb I personally think the FED must delay the hike. I would be very curious to see how the hike in December has aided the US growth. So far nothing has stood out for me. Hence like some other folk, I think the FED owe it to the global economy to delay hiking.

As far as the BoE decision goes, no change is expected and there is talk that Ian McCafferty could jump back into the no hike camp which if confirmed will add further pressure on the GBP. While the GBP has found its feet and rallied over the past 72 hours, I believe this is merely a temporary phenomenon. Reality is the BoE are concerned and have vocally voiced this concern which has led the the Pounds downfall. I am afraid to say, there is more to come.

Coming back to my comments above on the US economy and FED hikes, a member of the FED (Fischer) commented yesterday that  it was too difficult to gauge the impact on the U.S. economy from recent turmoil in financial markets and uncertainty over China, leaving the FED members “uncertain” as to what to do next.  He added, “If these developments lead to a persistent tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the United States,” Fischer told the Council on Foreign Relations in New York on Monday. “But we have seen similar periods of volatility in recent
years that have left little permanent imprint on the economy.” In other words and in language you and I can understand, he is basically saying LET’S WAIT FOR NOW. Hallelujah – maybe just maybe they are listening.

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One of the biggest non-surprises of the Monday morning open was the fact that the PBoC (Peoples Bank of China) allowed their currency, the renminbi to weaken at the official fix this morning. As I mentioned last week, following the Japanese central bank’s move into negative interest rates, one of the key ramifications that would need to be studied would be China’s reaction. The weakening of the renminbi was modest to almost negligible, but considering that this is the first day in 6 where the fix has been weakened is probably significant. Still, it’s too early to tell what it all means, it’s just noteworthy.

We got some fairly important US data last Friday, growth: there was consumer spending and wage growth data. It wasn’t the best! Consumer spending was slower, business investment was lower and the strong dollar is clearly having an impact on exports, while recent negative risk sentiment is likely to weigh on the US consumer. Still it’s important to note that this was the first estimate of GDP for Q4 2015, these initial releases are notoriously unreliable. It would surprise no one if there are revisions which greatly change the number in the coming months. One thing is clear though, economists are now less positive about the US economy and have both increased the likelihood of recession (albeit from 15% to 20%) and lowered the possibility of rate hikes in 2016. The only surprising thing was that the dollar appeared to rally strongly in the wake of the data release, although that could have been due to the “buy the rumour, sell the fact” effect. I think it would be far too early to get excited about this weak data. As pointed out by a top economist, employment growth as shown by non-farm payrolls was at its strongest 3 month average over the last quarter of 2015, and domestic demand remains solid. It will take more than this to erode all of the positives in the US economy at the moment. Perhaps if we see a more sustained period of bad data coming out of China we might start to concern ourselves about the impact on the US economy, but we also need to bear in mind that a weaker renminbi and lower energy prices will be a positive boost to US consumer disposable incomes. For now, I suspect the Federal Reserve will continue to focus on labour market data, more to come on that a bit later.

Elsewhere, over the weekend, the Nigerian government has apparently been exploring borrowing as much as $3.5bn from the World Bank to help fund the massive budget deficit brought on by collapsed oil revenues. While a lot of corporates are holding back on their demand for dollars, hoping that the naira will recover and USD/NGN will once again move below 300, I am not so sure. The naira has now traded for almost a month above this level, we should never underestimate the psychological impact of getting used to new headline numbers. I think we’re all getting used to trading above 300 now, for better or worse.

This, containing the first Friday of the month, is the week of the non-farm payrolls report. On Friday, the US data release will be the first telling us about labour market activity in United States in 2016. For all the gloom and doom, economists are still forecasting 190,000 new jobs created. Certainly it’s a decline from the running 3 month average of 280,000, but still a decent number. It’s a fairly low bar to be honest, but given all of the weather related issues in the last few weeks it might not be too far away from the mark. We also look forward to an interest rate decision in the UK, ISM and productivity data in the US and speeches from ECB President Draghi. Lots to see!

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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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