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  High Low     High Low
EUR/USD 1.1454 1.1391   USD/ZAR 15.24 14.94
GBP/USD 1.4158 1.4082 GBP/ZAR 21.51 21.17
EUR/GBP 0.8115 0.8064 USD/RUB 68.08 67.09
GBP/EUR 1.2401 1.2323 USD/ILS 3.8063 3.7766
USD/JPY 109.91 108.63 S&P 500 2069 2062
GBP/CHF 1.3516 1.3425 Oil (Brent) 40.35 39.63
GBP/AUD 1.8600 1.8507 Gold 1232.0 1221.0

Big news overnight was the FED minutes that indicated “many” committee members warned of risks to the US economy from foreign global developments. Discussions were held whether it was prudent to raise rates in April however a number of the members argued that “the underlying factors abroad that led to a sharp, though temporary, deterioration in global financial conditions earlier this year had not been fully resolved and thus posed downside risk.” In other words as per President Yellens comments in March, it appears the FED will delay any rate hike until such time that the global economy has shown signs of calm and return to “normality”. Now is simply not the right time to throw fuel on the fire by raising US rates and burning not only the US economy, but the global economy as well.

Although the FED’s outlook for the US economy was fundamentally unchanged, it clearly saw global economic and financial developments as tilting risks sharply worse. In other words, members called for patience. President Yellen, in her post-meeting press conference, argued that the reduced number of rate hikes projected by market participants was offset by ‘some deterioration in the global economic outlook’ and that the committee chose not to raise rates and to lower their own assessment of the appropriate path of their interest rate policy. The FED members are obviously concerned that the global economy fallout could have detrimental effects on the US economy forcing them to “walk on eggshells”. There is really no point in raising rates to satisfy some members, when that decision could come back and bite the FED hard. That would force them into making a U-turn and cut rates back to 0.00-0.25%, something the FED do not want to do as this in itself could lead to added market and global volatility (at a time when calm is needed).

Greece hit the headlines this week after an unsubstantiated report leaks revealed IMF officials discussing stalled programme talks, while unconfirmed reports in the media indicated that PM Tsipras was preparing for snap elections. Since the report was published, Greek bond and equity markets have sold off markedly. With the ongoing problems in Greece from the migrant issue, I have no doubt that the Greeks will plead poverty again and ask the EU for an extra handout and alter the terms of the loans from her creditors. The migrant issue is simply out of the Greeks hands and they do have a point. This is an EU problem and one that needs to be dealt with by the group rather than Greece alone. This ongoing issue is only going to get harder for the EU to sort out.

USDJPY – enjoyed a meteoric rise overnight post FED minutes, rising to 108.63 and its strongest level since October 2014. Japan’s Ministry of Finance indicated that it would take steps in FX markets if necessary (as if!!!). While Japan would probably like to see a weaker JPY (assist exports and the economy) unfortunately the market is currently dictating the FX rate and the BoJ would be well advised to simply stand back and let market forces dictate. No point in wasting reserves.

South Africa will hold local government elections on Aug. 3, President Jacob Zuma said on Wednesday, in what looks likely to become a referendum on his leadership after an attempt to impeach him and mounting concern about weak economic growth. To add fuel to the ZAR fire, ratings agency S&P revised 2016’s growth down to 0.8% from 1.6% and 2017’s growth from 2.15% to 1.8%.  Given the local issues with the drought and lower commodity prices, as well as the internal rife in the ANC (Zuma’s house) you must think the ZAR’s on a slippery slope and it is only a matter of time before the market sells the ZAR heavily again. Like the Proteas, things are not looking good for South Africa’s economy.



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