Global financial uncertainties continued this week, after data showed inspite of growing US economy the slowdown in job market weigh on growth. The British referendum is also in focus as the Britain go to the poll on Thursday 23 of June to decide their membership in the European Union.
Here is the highlight of last week.
US – The Federal Reserve held rates unchanged citing global growth concerns and UK’s EU referendum uncertainties, a move that drove the dollar lower against its counterparts. Even after predicting the economy will still grow 2 percent this year but 0.1 percent lower than previously forecast 2017 growth rate.
UK – The pound rose about 1 percent on Friday after campaign for the Brexit referendum was suspended on Thursday following the killing of Jo Cox, a Labour Party member and supporter of EU membership.
NZ – New Zealand economy rebounded once again with a better than expected GDP, amid escalating Auckland housing market. Although, economic growth was below 0.9 percent recorded previously, still better than 0.5 percent predicted by economists. The Kiwi climbed as high as 71.46 cents against the US dollar, its highest in over a year.
Japan – The Bank of Japan continues its struggle with the surging yen and has reiterated its readiness to intervene in what Japan Financial Minister Taro Aso described as one sided move that is hurting their economy. The yen gained against the US dollar reaching two year low on Friday.
Australia – Unemployment rate remains the same 5.7 percent in May and labour market added 17,900 part-time jobs, but the Aussie dollar failed to respond likewise after National Australia Bank (NAB) data showed business confidence dropped from 5 to 3 in May, suggesting businesses are worried about sustainability.
Canada – Canadian economy is still yet to find its rhythm after Alberta wildfire disrupted oil production, though the unemployment rate improved from 7.1 percent to 6.9 percent, the inflation rate plunged to 1.5 percent from 1.7 percent in May. The loonie lost 65 percent of its last week gain against the US dollar after peaking at 1.3084, below 1.3142 resistance level.
This week, German ZEW Economic Sentiment, Australia Monetary Policy Meeting Minutes, US Fed Chair Yellen Testifies, US Core Durable Goods Orders, German Ifo Business Climate and of course EU Membership Vote top the list. This week I will be looking at GBPCAD, EURGBP, and GBPCHF.
GBPCAD
Once again referendum outcome will determine GBP price direction this week, but with current situation and emotional sentiment created by the murder of Jo Cox, I am leaning towards “stay” vote even more.
Last week, I said in a group “This week, I am bullish on Yen, Dollar and bearish on Aussie but wary of GBP even with Brexit leading, I am sure they are not going to leave the EU just yet and I expect GBP to hit some real high price level as it becomes obvious”. That was on 7th Monday before Thursday incident.
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Prior to that, we’ve been selling GBPCAD since June 6, when the price was around 1.8745, but last week after failing to sustain a break of 1.8117 support level and forming a double bottom candlestick/bullish engulfing pattern that further validated 1.8117 as a solid support, and also confirm bullish run. This week as long as price remain above 1.8480 I am bullish on GBPCAD with 1.8745 as the first target. A vote in favour of Brexit will invalidate this view.
GBPCHF
This pair has called a bottom at 1.3413 in April when it failed to sustain a breach of 1.3507 support level and eventually breaking the downward trend on the 19th of the same month before hitting a 9-week low (high-lows) on Thursday last week. This week I remain bullish on GBPCHF after breaking 1.3926 previous resistance level for similar reasons I stated above a close above 1.3926 should open up 1.4197.
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EURGBP
Euro-area economy is still struggling, so is the UK but the single 19-nation currency has been more favoured with Brexit uncertainties when compared with the pound. The Euro-area economic data does not support the current bullish run of this pair and as always, a disparity in market price and economic data is alarming. This week as long as price remain below 0.7846 I am bearish on EURGBP, while targeting 0.7600. Please keep an eye on Brexit.
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.
Naira opened weak at N482 against the United States Dollar on Monday, March 8, 2021 despite the central bank’s latest initiative to start paying diaspora remittance recipients N5 per every $1 received.
CBN to Pay Receivers of Diaspora Remittances N5 for Every $1 Received
In a desperate move to encourage diaspora remittances, the Central Bank of Nigeria (CBN) has introduced the ‘CBN Naira 4 Dollar Scheme’ to pay diaspora remittance recipients.
In the apex bank latest circular directed to all Deposit Money Banks, International Money Transfer Operators (IMTOs) and the General Public on Sunday, the central bank said the move was to encourage inflows of diaspora remittances.
It said “In an effort to sustain the encouraging increase in inflows of diaspora remittances into the country, the Central Bank of Nigeria (CBN) hereby announces the introduction of the “CBN Naira 4 Dollar Scheme”, an incentive for senders and recipients of international Money Transfers.
“Accordingly, all recipients of diaspora remittances through CBN licensed IMTOs shall henceforth be paid N5 for every USD1 received as remittance inflow.”
The new CBN Naira 4 Dollar Scheme was introduced after the apex bank failed to attract enough diaspora remittances following the November 2020 declaration that recipients of diaspora remittances can now receive their funds in US Dollars.
However, because of the negative impact of COVID-19 on diaspora Nigerians, remittances to Africa’s largest economy plunged in 2020 and has remained below CBN’s projected $1.8 billion to $2 billion per month. The idea was to flood the economy with about $20 billion yearly diaspora remittance.
Therefore, the central bank was forced to introduce a new initiative gear towards luring diaspora remittances into the economy to complement dwindling foreign reserves caused by the weak crude oil production of 1.4 million barrels per day and the generally weak revenue generation.
The weak fiscal buffer amid persistent dollar scarcity that has plunged the Naira value against global counterparts is forcing the apex bank to take obvious desperate moves to sustain Nigeria’s weak economic recovery.
Nigeria’s economy unexpectedly rebounded from the recession with a 0.11 percent growth rate in the fourth quarter of 2020 despite manufacturing and other key sectors still contracting.
The central bank said “In light of this, the CBN shall, through commercial banks, pay to remittance recipients the incentive of N5 for every USD1 remitted by sender and collected by designated beneficiary. This incentive is to be paid to recipients whether they choose to collect the USD as cash across the counter in a bank or transfer same into their domiciliary account.
“In effect, a typical recipient of diaspora remittances will, at the point of collection, receive not only the USD sent from abroad but also the additional N5 per USD received.”
The apex bank added the new initiative will take effect today, March 8, 2021.
“Please note having discussed with banks and IMTOs, the scheme takes effect from Monday 8 March 2021 and ends on Saturday 08 May 2021,” CBN stated.
Naira remained pressured across key foreign exchange markets on Friday, March 5, 2021 as scarcity persists. The local currency traded at N480 to a United States Dollar at the parallel market on Friday morning while it exchanged at N675 to a British Pound and N582 to the European common currency.