`	High	Low			High	Low
EUR/USD	1.1228	1.1182		USD/ZAR	12.1667	12.1143
GBP/USD	1.5726	1.5676		GBP/ZAR	19.11	19.00
EUR/GBP	0.7149	0.7126		USD/RUB	55.45	53.58
USD/JPY	123.97	123.55		USD/ILS	3.7819	3.7246
GBP/CHF	1.4691	1.4633		S&P 500	2,113	2,107
GBP/AUD	2.0405	2.0251		Oil (Brent)	63.96	63.59

So.. where to start? I’ll do the bad news first, we always like our readers finishing our updates with a smile..

 

It looks like we were all too optimistic about an imminent resolution to the Greek crisis. A resolution that would have released €7.2bn of desperately needed bail-out funds to the Greek government, a compromise that would see the approximately €1.5bn owed to the IMF this month dealt with. Those hopes appear dashed at the moment, of course given the nature of European politics, there’s every chance that a last minute compromise is found. I don’t know about the rest of you… I just want the whole darn thing to be over! This time around the IMF is having the greatest difficulty accepting the economic reform proposals of the Greek government, but the Greeks are holding fast to their plan, they would rather increase effective taxation than cut benefits. I’m not one who thinks much of IMF plans for crisis hit countries on a historical basis, but there’s no doubt which path would be more sustainable. Particularly in a country that has such a terribly difficult time collecting taxes already.

 

The better news, is that Q1 GDP in the United States has been revised higher, so the first few months of the year actually saw only a slight decline of -0.2% versus the initial -0.7% number. That’s a considerable improvement, but obviously a lagging indicator. It does however confirm that the U.S economy has continued along at a solid if not spectacular clip. Remember the excuses for a weak Q1? Weather, ports strike, strong dollar etc… well this implies that the US economy handled all those headwinds rather better than expected. If 2015 is anything like the previous year the next two quarters could show dramatic improvements on the first. So at least one part of the global economy is making a decent fist of things then. Some strong consumer spending data later on today could reinforce this view, and no doubt the data will be keenly monitored by the Federal Reserve.

 

The big question now, is what impact will the continuing Greek saga have on European stocks? We’ve seen prices rally 7% since last week Thursday, on the back of hopes of a resolution and EUR/USD fell 2% over the same period. Does some of that hope get unwound? I’m guessing not to any great extent, unless there are more definitive signs that the parties are actually moving further apart. Students of recent European politics know that brinkmanship is a weapon used at the highest levels, I’m not done hoping yet!

 

The Central Bank of Nigeria, after consultation with senior commercial bank officials in recent days has put forward proposals to lessen the pressure on the naira (NGN) and the foreign currency reserves it holds. Here is the document:-

http://www.cenbank.org/Out/2015/TED/TED.FEM.FPC.GEN.01.010.pdf

The backstory is that the CBN has been under pressure in recent weeks following news that JP Morgan is going to review the participation of Nigerian debt in their emerging market index. An unwelcome situation indeed, as this would result in far less interest in Nigeria from foreign investors, loss of prestige, a significant impact on naira liquidity… I could go on. The solution arrived at by the CBN, while laudable, isn’t really what you expect from central banks. But restricting the access to foreign exchange for certain imported goods, which are actually also produced in Nigeria does have the sniff of common sense about it. Why does Nigeria import cement when it has Dangote? Why on earth does a country like Nigeria import palm kernels/ palm oil/ vegetable oils? This is Nigeria’s wheelhouse, it shouldn’t be so! It is hard to disagree with the sentiment behind these restrictions, but the other question needs to be asked. Why are imports of these products able to compete with local products at what would be seen as fairly punishing exchange rates? There are clearly gaps in Nigerian infrastructure and inefficiencies which if tackled as a priority by the new Buhari administration would eliminate the need for imports without the need for decree. Food for thought. One would hope that the new administration consults these same bankers, and other business leaders to plot a sensible path to realise Nigerian economic potential.

 

After a number of days of dollar strength, mild reversals would not be a surprise. That said the short term trend is clearly in favour of the dollar. Key levels to watch are 1.1292 in EUR/USD, and 1.5803 in GBP/USD. Above those levels, and the short term trend should be questioned.

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