|USD/NGN yesterday’s close||414|
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Oil futures edged up on Tuesday as the U.S. dollar erased earlier gains, but doubts that producers would be able to agree to an output freeze continued to drag on prices.
South Africa’s rand weakened against the dollar on Monday as the greenback rose on expectations that U.S. interest rates would rise soon, adding pressure on the currency which has been knocked by concerns over the finance minister’s future.
Nigeria’s currency market registered $327 million worth of trades on Monday, about six times more than its usual volume, the market regulator told Reuters. A Nigerian militant group, which has claimed responsibility for a series of attacks on oil and gas facilities in the southern Niger Delta energy hub in the last few months, said on Monday that it had halted hostilities.
Kenya’s shilling was steady on Monday and traders said it was seen weakening due to anticipated dollar demand from sectors like energy.
Very interesting comments indeed by Pres. Yellen of the FED on Friday at Jackson Hole. Her sheer confidence was exceptional (we know she wants to hike rates sooner rather than later) despite the calls by her fellow members to wait. Yellen noted “in light of the continued solid performance of the labour market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months”. What seemed to be missing though were he concerns about the global economy namely, the sustainability of US labour market, Chinese growth and the fallout from Brexit. I have agreed with the FED members who have called for just 1 rate hike (to come) in December. Yellen appears to be calling for September and December. I think this Friday’s NFP report will be that much more important as it will indicate just how healthy the US labour market is following July’s +287k and August +255k. Anything in that region will probably sway the FED to raise rates on the 21st September and then again 14th December (assuming the labour market continues to shine). What does surprise me is Yellen appears to be going it alone and not worrying about external shocks from the slowdown in China and the yet to be determined fallout from Brexit. Truth is no one quite knows how things will turn out once the negotiations start on Brexit. What we do know is local companies that are importing have hiked their prices following the collapse in GBP. An article in the FT has confirmed this as companies pass on the increased costs (of importing) to their customers. Exporters on the other hand have had a field day and one can only surmise that the current account will balance up via higher receipts for exporter’s vs higher costs for importers.
The USD did what we expected following Yellen’s comments and rose vs the EUR (trading sub 1.12 now) and GBP (sub 1.31) – GBPEUR remains range bound 0.85/0.87 (1.1500/1.1765). PM May has summoned her MP’s and told them to embrace Brexit and accept that the people have spoken. Labour’s candidate Owen Smith has recently commented that should he win he will push for another referendum. He also stated that Corbyn’s total lack of care during the referendum was because (behind the scenes) he wanted Brexit and probably voted Leave. No wonder he was not passionate like Blair and Brown and Darling calling for a Remain vote by labour supporters. While I am clearly a Conservative, if Corbyn stays Labour’s leader it is quite possible UKIP and Lib Dems could become the new opposition party in parliament. Not a bad thing then if you are a Conservative …
So for the rest of the week….EUR/USD and GBP/USD likely to trade southbound. In other words, USD maintains the “upper hand” ahead of NFP on Friday.
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