|USD/NGN yesterday’s close||421|
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Crude prices extended gains on Tuesday, buoyed after top producers Russia and Saudi Arabia agreed to cooperate on stabilising the oil market, but a lack of immediate action to rein in output capped gains.
South Africa’s rand firmed against the dollar for a third straight session on Monday as U.S. interest rate fears receded and, although risks around domestic politics capped gains, it traded nearly 3 percent above last week’s one-month low. Members of South Africa’s ANC chanted slogans outside its headquarters on Monday demanding President Jacob Zuma step down in a rare public show of anger in the ruling party after its worst election performance since the end of apartheid in 1994. South Africa’s biggest platinum mine-workers’ union and the industry have failed to reach a deal on workers’ pay, the union said on Monday, raising the prospect of industrial action in the world’s top producer of the white metal.
Nigeria’s national oil company said on Monday there were no immediate plans to increase gasoline prices, days after fuel marketers and former NNPC management called for the removal of a cap on price levels.
The Kenyan shilling held steady against the dollar on Monday as demand from retail importers and manufacturers was seen being met by inflows from charities and the tourism sector.
Pretty quiet sideways trading yesterday as the market caught its breath for Labour Day. Following last Friday’s “disappointing” NFP number, traders have started to weigh up whether the FED will indeed raise US rates on 21st Sept or wait until December (and raise by 0.50% as I am predicting). There has been no let up on Chinese growth, and the US made it very clear over the weekend that their priority is the EU bloc with the UK bringing up the rear. In other words all is not as well as the FED would have hoped. While the US continues to trade in or around 2.0-2.5% GDP the US labour market shows signs of fractures. There is no consistency to the growth rates and month by month the numbers fluctuate wildly. That says to me that there are still risks and corporates are not hiring as aggressively as the FED would have liked. While inflation is creeping up, the rise has more to do with external factors outside the US’s control. I continue to stick to my guns on this one and think the FED will delay hiking in 2 weeks and rather wait till December once the US elections are out the way and hit the market with a double shot raising rates 0.50%. That in itself will set the tone for the USD into 2017 and should give the US economy the boost by attracting investors looking for increased yield.
The GBP received yet another boost yesterday as Services PMI came in at 52.90 from 47.40 (yet another 5 point increase). The rise was the largest in over 10 years and again signaled the UK’s resilience to Brexit. Seems my calls last week for the GBP to rise towards 1.36-1.38 are now gathering momentum (short term). Again I must reiterate, the rise in the GBP must not be taken as a mark of things to come in the medium to long term as negotiations on Brexit have yet to begin. There has been an enormous amount of rhetoric over the past 72 hours regarding the UK’s standing amongst the US, EU, China and Australia. I can tell you one thing, the US and EU will not be handing out party bags to the UK when negotiations start. We will be lucky to get away with a piece of cake. Why on earth would the US, China and EU agree to the same terms of trade but restrict the free flow of workers. The points system as in Australia and as recommended by Johnson and Gove will simply not work. We are vastly different countries and our geographic location makes us attractive to the US and East in terms of access to East and west. No wonder every man women and child wants to come to the UK. Then there is that small issue of the UK being an island (like Manhattan) so there is only so much we can absorb before things get messy.
As for the coming week I still think the GBP will appreciate against both the USD and EUR as the UK data impresses and investors start to claw back short GBP positions.
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