High	Low			High	Low
EUR/USD	1.1077	1.1035		USD/ZAR	14.88	14.69
GBP/USD	1.3031	1.2795		GBP/ZAR	19.28	18.98
EUR/GBP	0.8630	0.8494		USD/ILS	3.9162	3.8728
GBP/EUR	1.1773	1.1587		S&P 500	2092	2074
USD/JPY	101.77	100.57		Oil (Brent)	48.40	47.63
GBP/AUD	1.7475	1.7259		Gold	1371.0	1354.0
				USD/NGN yesterday’s close		353
Please get in touch with us if you need the latest USD/NGN price

So according to Mr Gove and Mr Johnson during and in the run up to the 23 June, the comments made by PARITYFX, FED, BoE, ECB, BoJ, IMF, World Bank, Mr’s Cameron and Osborne regarding the chaos and potential losses in the financial markets were and I quote SCAREMONGERING. Really!! Scaremongering perhaps I am wrong that GBPUSD traded as low as 1.2795 (from 1.5025) and GBPEUR 1.1587 (from 1.3158) at 10pm on 23^rd June. Is that scaremongering or is that a fact. In addition 2 well know property funds (£10billion) have ceased trading and returning funds to the investors because of BREXIT fears. Behold my fellow UK citizens who voted LEAVE – THANK YOU SO MUCH FOR UNDOING ALL THE EXCELLENT WORK DONE SINCE 2008. You know what, I guarantee you when these LEAVE people suffer because their income has fallen and they lose their jobs, they will BLAME THE BANKERS because THEY are responsible for sending the GBP weaker. Always someone else’s fault. My holiday to Spain is now 15% dearer….and for what, why??

So, the GBP sank to a 31 year low, with fears mounting about the effect that the UK (decision to leave the EU) will have on the global economy. This has caused investors to flee high yielding assets again in search of safe haven status (Look at GOLD up over $125 since BREXIT). Yesterday we had the BoE Governor take steps to ensure that UK banks can keep lending with an amount of £150bn being mentioned. The Governor said that the Central Bank would lower the amount of capital banks are required to hold in reserve, freeing up excess money for lending as well as lowering interest rates in the coming weeks.

Honestly I would love to write more but I just can’t bear to write any more BAD NEWS. Pure sadness

 

 

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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	High	Low			High	Low
EUR/USD	1.1157	1.1119		USD/ZAR	14.74	14.52
GBP/USD	1.3295	1.3161		GBP/ZAR	19.50	19.30
EUR/GBP	0.8460	0.8363		USD/ILS	3.8643	3.8443
GBP/EUR	1.1957	1.1876		S&P 500	2108	2098
USD/JPY	102.60	101.87		Oil (Brent)	50.17	49.61
GBP/AUD	1.7676	1.7565		Gold	1352.0	1337.0
				USD/NGN yesterday’s close		353
Please get in touch with us if you need the latest USD/NGN price

FIRSTLY APOLOGIES FOR NOT WRITING THIS COMMENT OVER THE PAST WEEK

So here we are, the electorate has voted with their heads (rather than their heart) and we are exiting the EU. Shameful, sad, disappointing, upsetting, wrong, and catastrophic.

ParityFX (the FED, BoE, ECB, IMF, World Bank, heavy weight corporates) was not scaremongering when we said the GBP will collapse if LEAVE wins. As things stand the GBP has dropped 13.50% vs the USD and 9.75% vs the EUR…and counting. We have been asked several times if this is likely to continue and the simple answer is yes, we are going to suffer more. The Chancellor has given up on his promise to have a budget surplus in 2020 and has indicated that he will be looking to cut corporation tax to 15% (no timeline) to continue attracting business to the UK (good luck with that). The BoE has hinted they are likely to CUT UK interest rates (by 0.25%) at their meeting at either the 14^th July/04 August meetings and pump whatever liquidity is required into the market. I am sorry to say, that despite the best efforts by the Chancellor and BoE, the UK economy is likely to lose between 1.50-2.00% points on our GDP. All the excellent and hard work over the past 8 years has just been flushed down the drain. From being one of the top 3 fastest growing economies (amongst the G20) we are now BELOW GREECE!!! And that my friend says it all.

I cannot for the life of me explain what people were thinking. In fact we know that what swayed the vote, the LEAVE vote exercised by the over 65’s. Thank a lot. What about the “new” generation, did they not care about their future…obviously not. Chancellor Merkel told the Swiss yesterday that if they want to remain in the EU they need to allow the free movement of labour. The Swiss allowing free movement of labour now that will be something to behold.

If the UK think they will be able to muscle the EU into entering into a favourable trade conditions and at the same time limit free movement of people, then we are in for a shocking surprise. Already the 2 big LEAVE stalwarts (Johnson and Farage) have quit leaving someone else to pick up the baton and deal with the EU. It is like getting away with a drive by shooting. It is disgraceful. We should have ANOTHER REFERENDUM NOW and see how the electorate vote after all the lies and departures. These 2 should never be allowed to hold a public office ever again. Do they care, not on your life.

If fact as I write this comment the GBP has fallen another 50 pips at the open as traders batter the GBP. I really cannot see how we are going to come back from this. I think the consequences will continue to reverberate globally and the big winner ultimately will be the USD which is now likely to hit PARITY vs the EUR and wait for it, there is now talk the GBP too will hit PARITY vs the USD. While this all means UK exporters will receive more GBP for goods priced in USD and EUR, importers will be heavily hit and I am in no doubt looking to see prices start to rise as price hikes are passed onto the consumer. So all you LEAVE voters, WELL DONE your income just collapsed. Furthermore it would not surprise me to hear the Chancellor move the pension age even further out and cut benefits. After all we are heading back to austerity.

I cannot begin to tell you has sad I am right now. I was so confident people would vote REMAIN and continue to enjoy the healthy lifestyle we have been accustomed to over the past few years as business grows. Now I am afraid I am worried, VERY worried. I truly do not know how the EU and the rest of the world will deal with the UK (if we can call it that after Scotland call another referendum and this time vote to leave and join the EU).

So BREXIT, CAMERONEXIT, ENGLANDEXIT, JOHNSONEXIT, FARAGEEXIT, LABOURJOKEXIT, CONSERVATIVESHOPEEXIT, GBPUSDEXIT, GBPEUREXIT and finally MY EXIT

Have a good day and enjoy your summer holiday in the USA, Europe, or anywhere else foreign – it just cost you over 10% MORE. Nice!!!

 

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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Sometimes I really dislike democracy. It’s ok when people vote as you want them to, but on such a huge decision as this you just feel helpless. The EU referendum results are coming in and it’s fairly certain now that the United Kingdom has voted to leave. The markets have moved in fairly dramatic fashion. As I write this, European bourses are down more than 10%, the Nikkei down 8%, hundreds of billions of dollars in value have been lost. It all seemed so optimistic (if you wanted the UK to vote ‘Remain’) in the late evening, and then I started to get text messages and my phones rang while I tried to sleep. It was obvious that things had taken a turn for the worse. You don’t need to look at the exit polls for a timeline of how the vote was evolving, the chart for GBP/USD is a more potent illustration.

The politics are going to be very interesting now. Some argue that the EU will propose a better deal to keep the UK in, but I’m not sure how feasible that is for any number of reasons. The most obvious is that a large proportion of those who voted to leave, did so on the basis that there would be no circumstance in which they would change their mind. Another thing to consider is that the risk for the EU now, if they were to propose a new deal for the UK, would be that other Eurosceptic leaning countries like Denmark and Poland, and perhaps even the Netherlands might insist on changing their own relationship with the EU as well. Rationally it makes more sense for the EU to take a hard stance, in the hopes that it would dissuade any others from flirting with exit. At this point in time the priority in the upper circles of the EU has surely got to be containment.

 

In terms of currencies, I would suggest that we will see volatility aftershocks for the next few days. We really are in the unknown at the moment, but for the pound sterling surely there are significant problems ahead. For the last 30 years the UK has been the preferred destination for foreign direct investment into the EU, it’s entirely possible that a significant portion of those investments are now at risk. I have heard stories of major investment banks discussing Brexit contingencies which involve moving operations to places like Frankfurt, Paris and Dublin. But it’s more than that… consider the gilts market, since the global financial crisis of 2008, foreign investors have bought huge tranches UK sovereign bonds and the losses they are experiencing today are catastrophic. Do they hold on, do they stop loss? And what happens to the Eurobond business that’s been conducted out of the City of London for decades, it’s well known that the ECB has not been particularly enthused about so much offshore trading of euro denominated assets. And the big elephant in the room hasn’t even been mentioned yet. London property has been used as an alternative to gold for years, now the entire premise for that flight to safety trade has been put to the question. There are many significant reasons why we could and probably will see a structural outflow from the United Kingdom in the coming years, so it’s hard to be positive about the prospects for the pound sterling at this point in time.

 

The pound is not the only currency which is likely to be vulnerable now, the euro is surely in the firing line as well. Brexit represents a substantial negative to the Eurozone economy which will have to be reflected in the value of the euro versus other currencies. Even worse the market is likely to assign a break up risk premium to the euro. EUR/USD lower seems likely in my view. In times of uncertainty we would normally expect to see the dollar rally and that’s certainly what we’ve seen so far, but at some point the market will have to consider the fact that rate hikes by the Federal Reserve are probably off the table now. Counter-intuitively this could end up being a great opportunity to buy equities, as it wouldn’t be a huge shock if we see some sort of coordinated response from central banks to calm fears of a global recession. It might end up being the sort of over-reaction we saw in the aftermath of the crash in 1987, but everything always looks obvious in hindsight.

 

I can only summarise, on a morning in which we have seen a record move in GBP/USD, that we are likely to see a lot of volatility today and in the coming days. As politicians in the UK and the EU scramble to make sense of where we are, it’s likely that they will have a more significant impact on markets than normal. Please make your trading decisions carefully and recognise that heightened uncertainties mean that prices are fluctuating more than normal and spreads are necessarily wider than you have been used to.

 

 

 

 

 

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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	High	Low			High	Low
EUR/USD	1.1350	1.1294		USD/ZAR	14.64	14.53
GBP/USD	1.4847	1.4689		GBP/ZAR	21.69	21.39
EUR/GBP	0.7699	0.7639		USD/ILS	3.8587	3.8289
GBP/EUR	1.3091	1.2989		S&P 500	2099	2084
USD/JPY	104.99	104.00		Oil (Brent)	50.91	50.31
GBP/AUD	1.9747	1.9574		Gold	1272.0	1259.0
				USD/NGN yesterday’s close		340
Please get in touch with us if you need the latest USD/NGN price

THE DAY OF RECKONING HAS ARRIVED

IT’S PRETTY MUCH NECK AND NECK IF YOU TRUST THE POLLS

THE TIME TO PUT PEN TO PAPER HAS ARRIVED.

WILL WE STAY OR WILL WE GO.

From the politicians to business leaders and you and I the facts (and lies) have been laid out for the electorate to decide. I saw my GP yesterday (don’t worry I am ok) and we of course invariably discussed today’s referendum. He is voting LEAVE. I asked him why given the expected financial consequences and he replied because the NHS is a mess and needs cleaning up. He told me a story of one of his patients who hails from Poland. His mom needed a shoulder operation and back home it would have cost £10,000 (not quite sure why she would have to pay when citizens get free medical assistance – guess he forgot to add this when telling the story). So what he did was move his mom over to the UK to live with him for 6 months. After this she walked into her local hospital, was seen by the A and E doctors and of diagnosed her shoulder issue. Suffice to say she was booked in for the operation (which went smoothly) and she was discharged. Following her recuperation period, yes you guessed it, she jumped back on a plane and went home. Now may I say how exceptional the NHS are and I applaud the doctor’s nurses and surgeons. THIS IS WHAT MAKES THE UK GREAT!! Whether or not you agree it is right or wrong, at least the sweet old lady is now healthy and able to play with her kids and grandkids. Of course we all know that EU citizens come to the UK and get NHS help for free. But that is a UK POLICY not an EU policy. If I went to Spain, Germany, France etc, and I wanted this procedure I would have to pay!! Simple. So here is an idea, GOVERNMENT officials, pass a law that changes how people can use (and abuse) the NHS and problem solved. If the lady above had to pay for her operation in the UK, she would have weighed up who she thought would take better care of her. It would have been a simple decision.

 

G7 finance leaders will issue a statement stressing their readiness to take all necessary steps to calm markets if Britain votes to exit the EU (Reuters). The IMF, World Bank, ECB, Chancellor Merkel, President Hollande, President Obama, FED Chairwomen Yellen and our own highly respected BoE governor Carney (to name but a few) have all voiced their concerns over Brexit. These are respected politicians and central bankers. Their comments can simply NOT be ignored. After all they run some of the biggest economies globally and know a thing or 2. While the NHS and immigration are real issues for the UK, the UK has the power to change things so that it suits our country. Politicians and MP’s from both sides should get together and work towards a fair legislation that restricts immigration and allows access to the NHS for people who have the right to use the service (everyone else simply has to pay).

Polls close at 10pm tonight and the first results should start trickling in from midnight. The final results are expected between 7am-10am tomorrow I believe. I expect the GBP to trade sideways to slightly stronger until the results start coming in. For once, I sincerely hope the polls (latest ones) are right AND THE UK ELECTORATE VOTE TO REMAIN IN THE EU

FOR MY SAKE, OUR SAKE, MY KIDS, YOUR KIDS, OUR FAMILY, FOR OUR FUTURE

VOTE REMAIN!!

 

 

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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	High	Low			High	Low
EUR/USD	1.1275	1.1236		USD/ZAR	14.79	14.65
GBP/USD	1.4711	1.4639		GBP/ZAR	21.74	21.47
EUR/GBP	0.7689	0.7653		USD/ILS	3.8684	3.8515
GBP/EUR	1.3067	1.3006		S&P 500	2092	285
USD/JPY	104.86	104.35		Oil (Brent)	51.61	50.87
GBP/AUD	1.9725	1.9609		Gold	1271.0	1261.0
				USD/NGN yesterday’s close		340
Please get in touch with us if you need the latest USD/NGN price

DRUM ROLL…….THE DAY BEFORE THE DAY OF RECKONING

Did you manage to watch the debate last night on BBC? Terrific viewing. But one thing kept coming up, TAKE CONTROL VOTE OUT. Huh? Take back control of WHAT. The LEAVE camp are living in cloud cuckoo land!! Do they honestly think that by leaving the EU the UK will suddenly be able to dictate terms and throw their weight around? It is bordering on pure crazy. The EU and USA have been extremely vocal about keeping the UK in the EU so trust me when I say this, there will be MASSIVE REPURCUSSIONS by both the EU and USA if we leave. The LEAVE camp argue that the EU and USA will not change or stop any of the trade with the UK (being the 5^th largest economy globally) but that is simply plain wrong. It might not be an overnight change but I can assure you both the EU and USA will impose heavy tariffs on UK businesses exporting to their countries not to mention import duties which all means one thing, YOU THE CONSUMER WILL SIMPLY HAVE TO PAY MORE FOR YOUR GOODS. Take control…ARE YOU KIDDING ME!!!

Time and time again questions were posed to the LEAVE camp last night about their policies on how they will deal with the EU (our biggest trading partner) – no answer. What about the financial losses that will ensue if we vote to leave, the LEAVE panel had the cheek to LIE and say there will be NO fall out and there will be no losses in the financial markets. Honestly I think that was vodka they were drinking and not water. The city is bracing itself for a 15-20% fall in GBP should LEAVE win. Pensions will be hammered, stocks will collapse and you the ones that voted out will be poorer not to mention the REMAIN camp who will suffer the abhorrent decision.

One of the big issues last night was IMMIGRATION. Fair do’s immigration is an issue. But tell me something, Boris says we must have an Australian points system. Ok, so someone with little tertiary education wants to move to the UK to work in the food industry or agriculture industry, are they going to be turned back because they don’t get 36 points…are you honestly telling me that the English, Scottish and Welsh who are out of work will suddenly say hey awesome I can get a job picking oranges or I can sit on my tuches and get my weekly benefits. Ain’t gonna happen. We need migrant labour. This labour force is what made the UK the 5^th largest economy globally (not bad for a tiny island). Why is it the rich Chinese, Russians, Middle Eastern’s and Europeans are all investing in the UK property market? Because we are simply a force to be reckoned with, we have honest policies and we are investor friendly (no not because of the weather J). I tell you this will blow up royally if we leave. Take back control!! We have MORE CONTROL BEING IN that OUT!!! That is a fact. So what if we have to pay ££££ to the EU…so what. That is the price we have to pay to be part of a 500mio+ membership and a membership that helps our SME’s flourish and sell their goods abroad. I am petrified for tomorrow because a leave win will set off a financial time bomb that will have severe financial repercussions for my family and those dear to me.

VOTE REMAIN AND KEEP CONTROL 🙂 

 

 

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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	High	Low			High	Low
EUR/USD	1.1344	1.1305		USD/ZAR	14.89	14.74
GBP/USD	1.4729	1.4632		GBP/ZAR	21.91	21.61
EUR/GBP	0.7745	0.7693		USD/ILS	3.8703	3.8444
GBP/EUR	1.2999	1.2912		S&P 500	2092	2079
USD/JPY	104.52	103.57		Oil (Brent)	51.11	50.51
GBP/AUD	1.9724	1.9565		Gold	1294.0	1232.0
				USD/NGN yesterday’s close		345
Please get in touch with us if you need the latest USD/NGN price

I think by now as an avid reader of our ParityFX Plc daily comment you will have realised I am in favour of REMAINING in the EU. My decision (my own personal opinion) is really quite simple. The financial benefit to me, my family, my business and basically my net income is greater REMAINING than LEAVING. While the LEAVE camp continue to harp on about immigration and their effects the truth is the free flow of migrants to the UK is clearly a BOOST to the economy. Think next time you walk into a restaurant, a pub, a supermarket, chances are the people serving you (with a smile) and picking your fruit and veggies are most probably born outside the UK and have come to the UK for a better life. I agree there is a small minority that takes advantage of the benefits that the UK offers and I am afraid to say they are the ones that make the headlines and skew peoples vote to thinking it is better to LEAVE the EU than REMAIN. But, do you honestly think in your heart of hearts that leaving the EU will suddenly stop the migration. There is no way on g-d’s beautiful planet that the UK will overnight put a stop to migrants, to immigrants not to mention kicking those that are here back to their countries of birth. Not only will that bring the UK’s economy to a standstill and send us back to a recession witnessed in the late 20’s and 30’s. I am sorry to say, but it simply does not add up.

Some of the wisest and most respected economists, banks and financial institutions of our day have ALL come out and said the UK must REMAIN in the EU to maintain their current financial standing and position within the world’s global trading fraternity. LEAVE and the UK will simply disintegrate. Please trust me when I say this. The UK as an economic powerhouse will change overnight from a “player” to a “spectator”. It will be quite simply an economic and financial catastrophe. Here are some respected quotes from people who are voting REMAIN:

Nouriel Roubini (Professor at Stern School, NYU, and Chairman of Roubini Global Economics): “Brexit would cause significant damage to the UK economy & to the employment & wellbeing of Britons. The UK is much better off inside the EU. Brexit could stall the UK economy and tip it into a recession as the shock to business and consumer confidence could be severe. The UK – having large twin current account & fiscal deficits – may risk a sharp currency fall & a sudden stop of capital following Brexit”‏.

George Soros – described as “the world’s most famous currency speculator” –warns it would trigger a sterling fall worse than that seen on Black Wednesday: “Too many believe that a vote to leave the EU will have no effect on their personal financial position. This is wishful thinking. It would have at least one very clear and immediate effect that will touch every household: the value of the pound would decline precipitously. It would also have an immediate and dramatic impact on financial markets, investment, prices and jobs”. Soros said that unlike after Black Wednesday, there was little scope for a cut in interest rates, the UK was running a much larger current account deficit, and exporters would be unable to exploit the benefits of a cheaper pound due to the uncertainty caused by a vote to leave the EU.

Sir Richard Branson has reiterated his support for the Remain campaign. Sir Richard told the BBC’s Andrew Verity that he is “very fearful” that the consequences of a UK exit from the European Union would be “catastrophic for Britain”, and he explains why he believes that it’s not just his business which will suffer, but the wider British economy. Branson said: “As an entrepreneur I have been known for taking risks throughout my career, but leaving the EU is not one of the risks I would want the UK to take – not as an investor, not as a father and not as a grandfather. I am deeply concerned about the impact of leaving.”

 

The GBPUSD rallied from 1.4062 to over 1.4700 yesterday as polls (if you can trust them) predicted the REMAIN camp has pulled level with LEAVE and in some cases ahead. While I have my reservations when it comes to polls (and I have said this over and over again), when it comes time to put pen to paper people will vote differently to what they might have voiced. I truly believe when we head to the polling station on Thursday people will (HOPEFULLY) realise that the financial catastrophe THAT WILL ENSUE SHOULD WE LEAVE, is simply not worth the risks and (unknown) benefits of leaving the EU and (HOPEFULLY) vote REMAIN.

Come on UK – PLEASE KEEP OUR BELOVED COUNTRY TOGETHER AND VOTE REMAIN.

 

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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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This is going to be an extremely volatile week with the referendum just a few days away now on Thursday 23^rd June. The most recent polls have shown the Remain campaign clawing back losses. I remain sceptical about the accuracy of the polling, as I am unwilling to assign too much confidence in the polling companies so soon after the election fiasco. It seems the market will take any information and run with it. So it’s not been a great surprise this morning to see a massive bounce in GBP/USD on the back of the polling update. There is a huge amount of uncertainty and this is reflected in the quadrupling of trading margins, and wider spreads over the next few days.

Even quotes for GBP/USD option premia have to be requested. If a sterling cross moves to your advantage, get your trade done, the situation might change at the drop of a hat….or at least a small sample poll update!

 

We’re starting to see evidence of convergence in the USD/NGN market as one would expect. Last week announcement by the central bank (CBN) that a more flexible exchange rate regime would be implement has resulted in the parallel market rate declining and the NDF market rising. Obviously there are inter-temporal issues when comparing the two markets – one is spot, and the other is the forward market – but this is convergence none-the-less. Both foreign investors and locals are taking a somewhat wait and see approach trying to gauge where fair value is, but these moves can only give confidence to investors that a new more transparent reality is evolving. A reality that can only be a positive for the Nigerian economy with businesses able to more effective plan without fear of a capricious central bank or government to stymie future assumptions. It is to be hoped that this new market consciousness extends to the import restrictions that the CBN has still not removed. If Nigeria is to develop any kind of functional manufacturing industry it needs to be free from senseless interventions.

 

 

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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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	High	Low			High	Low
EUR/USD	1.1273	1.1273		USD/ZAR	15.39	15.19
GBP/USD	1.4297	1.4196		GBP/ZAR	21.97	21.68
EUR/GBP	0.7908	0.7872		USD/ILS	3.8829	3.8408
GBP/EUR	1.2703	1.2645		S&P 500	2083	2074
USD/JPY	104.83	104.07		Oil (Brent)	48.33	47.24
GBP/AUD	1.9362	1.9259		Gold	1286.0	1276.0
				USD/NGN yesterday’s close		369
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PARITYFX WOULD LIKE TO TAKE THIS OPPORTUNITY TO SEND OUR HEARTIEST CONDOLENCES TO THE HUSBAND AND 2 DAUGHTERS OF MP JO COX WHO WAS BRUTALLY AND HEINOUSLY ASSASSINATED YESTERDAY AFTERNOON

AS A MARK OF RESPECT TO MP COX, PARITYFX WILL NOT BE WRITING A COMMENTARY TODAY

OUR THOUGHTS AND PRAYERS ARE WITH HER FAMILY, FRIENDS AND GOVERNMENT COLLEAGUES AT THIS MOST DIFFICULT AND SAD TIME

 

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Not unexpectedly the FOMC statement indicated that rates would be kept on hold. If there’s one key takeaway from the statement it is that the Federal Reserve is now clearly in wait and see mode. Mixed economic data, jobs growth slowing, inflation contained even if rising, anaemic growth elsewhere and the looming prospect of the EU referendum in the UK next week are just some of the factors which supported the case for a more cautious approach. Guidance for growth in 2017 and 2018 has been trimmed, although somehow the FOMC members still believe that further rate rises are on the table for this year. Still, the terminal rate after the hiking cycle is now expected to be lower than in previous projections, which to my mind is simply a case of the FOMC getting closer to what the bond markets have been telling us for some time. 2 year bonds are yielding less than 0.70% and 10 year bonds are yielding barely over 1.50%. Clearly this hiking cycle is not expected to be too aggressive.

 

I wonder if ‘Leave’ campaigners in the EU referendum were paying attention. They might feel entitled to accuse the governor of the Bank of England of political bias because of his warnings about the consequence of Brexit, but will they feel brave enough to say the same about Janet Yellen? She too is concerned about the potentially negative impact on an already weak global economy. At a certain point, when enough independent experts present a consensus about adverse consequences, will the voters in the UK take note? We’ll find out soon enough, the referendum is now only 7 days away.

Back to the FOMC, here’s a snapshot of the market reaction before and after the announcement.

First a short term chart for EUR/USD…

And here’s the S&P 500…

The lowered probability of rate hikes really puts a dent into any bullish dollar view, and not surprisingly the dollar has been a big loser out of all of this. You can see that in the dollar basket DXY, and it’s clearly visible in USD/JPY which has broken through a support level I’ve been watching for a while. Now looking at the longer term chart, a major support zone is under threat, and probably Prime Minister Abe’s economic plans as well.

Over the next few days Brexit is likely to dominate the currency markets with traders already widening spreads in anticipation of significant volatility ahead. GBP/USD and EUR/GBP are the obvious currency pairs that will receive special attention as the most liquid sterling crosses, but the entire GBP complex will be under pressure. You should factor that in when considering your currency needs.

 

Elsewhere the Nigerian central bank (CBN) finally released information about its plans to move towards a more flexible exchange rate regime. You’ll know that for the past year we have been insisting that such a move was not just necessary, but inevitable as well. Reality has finally caught up. Reading through the details it looks like the plan will be a sort of managed or dirty float, in comparison to the fixed exchange rate that has been in place for some time. In this type of regime there is less pressure on the central bank to intervene in the FX markets, as there are no bands, or fixed points to defend, so this should aid the CBN in its attempts to stop the erosion of its reserves. CBN has indicated that plans are in place to select about 10 primary dealers who can trade with the central bank when there are large deals in a system that is intended to make the market more transparent and price competitive. This is all welcome news and should greatly improve the signals that pass through to the wider economy. However there are still some restrictions in place which are likely to cause distortions to the market: the 41 imported goods and services which had been banned from accessing the interbank market remain, and Bureau de Changes continue to be barred from the interbank market. This is a real pity, and frankly it’s surprising that President Buhari continues to believe that restrictions like this which cause distortions and thus create avenues for patronage are compatible with his laudable aims of eliminating corruption from the Nigerian politico-economy.

 

So what does this all mean for the naira? This is a huge step in the right direction and will go some way to eliminating the concerns that foreign investors have had about Nigerian economic management. It’s entirely possible that some might be lured back in to the debt and equity markets – certainly the positive reaction from Nigerian stocks might be an indication that at least some speculators believe that this will be the case. These changes are due to start next week on 20^th June, and as Reuters put it, the naira will trade somewhere between 197 and 370! I think that unquestionably this will eventually lead to some currency appreciation, but do bear in mind that there’s a lot of pent up demand for foreign currency in Nigeria. To begin with, I suspect that traders will be patient and look for better levels to buy dollars. With the distortions that have been kept in the market we aren’t likely to get full transparency, but it should be a more comprehensible market with hopefully a little bit more two way risk. The reality is that the naira is likely to find a level around the 300 level, perhaps even the high 200s in the months ahead. What will be even more interesting will be plans to develop a forward/ futures market to trade the currency. This will require a deeper more transparent short term yield curve and we will study the evolution of this and report back to you when we are able.

 

 

 

 

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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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Later on today the FOMC will announce their rate decision for June. This has been widely anticipated and while there are concerns that the Federal Reserve is still trying to maintain their positive outlook on the US economy, it seems increasingly likely that they will opt for caution. We’re a weak away from the EU referendum in the UK, an event that could spark significant volatility, it’s hard to imagine the FOMC being so incautious as to hike now, and be forced to retreat if a ‘Leave’ vote sparks substantial global volatility. I’m not saying that’s going to happen, in fact I still think that the vote will be to stay in the EU, but just thinking about what keeps central bankers up at night, being forced to reverse a recent decision has to  be very high on the list. It’s not as if the US economy as hitting the ball out of the park at the moment. Frankly I would characterise the economy in the United States as being better than most, but what does that really say in a world of anaemic global growth? So in summary, at a pinch, I don’t expect the FOMC to announce a hike. I’m actually more interested to see what the statement says. We will of course bring that to your attention in following posts, and discuss the implications for the currency markets.

 

8 days to go before the EU referendum and sterling looks to be taking a bit of breather so far this morning. It’s been a frenetic weak with substantial declines versus the euro and the dollar. A recovery of some sort certainly seems appropriate, and I am biased towards this, but as ever the new polls are likely to have an impact. I’ve said it before, and I’ll repeat it now, I am very sceptical about the polling in the UK at the moment. The last major event, the UK general election, did not do much for the pollsters credibility, so why exactly should we believe everything that we’re hearing now? Particularly as a similar dynamic might be in play. Consider it, the ‘Leave’ voters tend to be far more passionate, they are advocates of change after all. It just might be that the polling samples are very difficult to correct for the apathy of those who advocate staying in, and thus we’re not getting a truly accurate picture. It may also be that those who might have passed on voting because they felt that the status quo might be maintained might now be panicked into getting out and expressing their democratic right. I think this is the reality, this is what is likely to happen, this is why I think that in the end the vote will be to remain, with a 3 – 4% majority. We shall see soon enough.

 

We’re still waiting for the Central Bank of Nigeria to publish information about their plans to make the naira more flexible. As I said a few days ago, it’s hard to imagine a scenario where additional flexibility does not include some sort of devaluation, whether it’s admitted or not, it’s likely that by the end of today there will be some sort of concession. King Canute couldn’t push the tide back, and the Nigerian government cannot fly in the face of economic realities. Already this morning, my sense is that the naira is somewhat weaker than yesterday’s closing. Depending on the quality of the CBN’s announcement the naira is fully capable of achieving some sort of short term recovery. This could happen if the CBN’s announcement allays the concerns of the wider investment community and a path becomes available for outside investors to put money to work in the Nigerian economy. A rally of that sort is likely to be short term however as the realities of daily supply and demand will continue to dominate the value of the naira. In any case we will update you with the CBN’s statement and our view on the implications for the naira going forward.

 

 

 

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.

Follow our tweets @parityfxplc

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