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Euro Hits Two-Week High as Draghi Left Rate Unchanged

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Euro currency

The euro hit a two-week high on Thursday after the president of the European Central Bank, Mario Draghi left interest rates unchanged and said “no need for extra stimulus for the time being”.

The European Central Bank cut 2018 Gross Domestic Product (GDP) growth forecast to 1.6 percent from previous 1.7 percent.

The decision to leave rates on hold was expected by almost all 70 analysts polled by Reuters but a sizable minority also expected an extension of the asset purchas program.

The euro gained 0.7 percent on the day to hit $1.1316 after the policy statement, its strongest since Aug. 26. The dollar also hit a two-week low of 94.514 against a basket of major currencies.

“The bank does not mind holding back with respect to (using) more aggressive measures, but the (bigger) question is how long they can afford to wait given that they are very late in the game of QE,” said ThinkMarkets analyst Naeem Aslam.

Traders expected relatively little from a news conference by ECB chief Mario Draghi beginning at 1230 GMT.

“The bar is very, very high for Draghi to be able to deliver any sort of dovish surprise here,” said ING currency strategist Viraj Patel, from London. “It’s really difficult to see him driving the euro lower.”

“Our idea is that it’s going to be a repeat of what we saw in May, with a Draghi disappointment – that’s the balance of risks,” he added.
The euro is barely 3 percent weaker against the dollar than when the bond-purchase program was first announced, in January 2015, and it is up almost 4 percent this year.

The yen edged up 0.2 percent against the dollar to 101.62 yen, clinging to gains of almost 3 percent made in the last four days, after a Bank of Japan deputy governor gave few fresh clues on whether the central bank will expand its monetary stimulus this month.

Analysts said the comments by BOJ Deputy Governor Hiroshi Nakaso seemed similar in tone to remarks by BOJ Governor Haruhiko Kuroda earlier this week, which acknowledged the costs of the BOJ’s aggressive stimulus.

“The main message doesn’t seem all that different. The general tone of weighing the costs and benefits were in Governor Kuroda’s comments as well,” said Shinichiro Kadota, senior FX and yen rates strategist for Barclays in Tokyo.

Data showing that China’s imports unexpectedly rose in August for the first time in nearly two years helped lend support to the Australian dollar, which rose half a percent to hit a three-week high of $0.7716 .

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Dollar

U.S. Dollar Pulls Back on Thursday After Hitting a 20-Year High

The United States Dollar pulled back slightly on Thursday after hitting a 20-year high on the back of rising interest rates and global demand for haven currencies.

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U.S dollar - Investors King

The United States Dollar pulled back slightly on Thursday after hitting a 20-year high on the back of rising interest rates and global demand for haven currencies.

The dollar index rose to 107.05 in the previous session, the highest in 20 years before pulling back to 106.57 at 11:07 am Nigerian time.

Against the Euro common currency, the U.S. Dollar gave back some of its gains on Thursday to trade at 1.0213, up from 1.0173 attained after dropping below 1.0350 support levels.

Similarly, the greenback pared gains against the British Pound to 1.2009 despite over 40 British lawmakers resigning their positions and calling for the resignation of Prime Minister Boris Johnson enmeshed in a series of scandals.

The value of the United States Dollar rose in recent weeks after it became clear that the Federal Reserve won’t be halting its rate increase anytime soon. The surge in demand for the United States Dollar was to avoid paying excessive borrowing costs going forward and also to ensure cash availability going into recession, known cash is king.

The Federal Reserve is expected to raise borrowing costs by another 50 basis points to 75 basis points in the month of July as it continues to battle 40 years high inflation rate of 8.6%.

This persistent increase in borrowing costs is expected to weigh on new job creation, new investment, earnings, and subsequently, drag on consumer spending that over the years has sustained the world’s largest economy.

Overseas orders will start waning American goods become more expensive to holders of foreign currencies. This, Investors King predicted would hurt manufacturing activity.

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Pound

British Pound Extends Decline as 44 British Lawmakers Resigns

British Pound sustained its decline against the United States Dollar and other global counterparts on Wednesday after five additional British lawmakers resigned their positions in protest against a series of scandals rocking the House of Commons in recent weeks.

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British pound

British Pound sustained its decline against the United States Dollar and other global counterparts on Wednesday after five additional British lawmakers resigned their positions in protest against a series of scandals rocking the House of Commons in recent weeks.

A total of 44 British lawmakers have resigned under Prime Minister Boris Johnson’s leadership, accusing the Prime Minister of engaging in or condoning actions that put parliament moral in question.

Against the American Dollar, Great Britain Pounds (GBP) dropped from 1.2164 it peaked on Monday to 1.1934 in the early hours of Thursday.

While against the Japanese Yen, one of the world’s safe-haven currencies, GBP exchanged at 162.02, down from 165.26 it traded on Tuesday.

The decline was broad-based as the embattled GBP also lost some ground against the Swiss Franc to exchange at 1.1568, down from about 1.1687 on Tuesday.

On Wednesday,  five lawmakers signed in one go. In their letter, they said “It has become increasingly clear that the Government cannot function given the issues that have come to light and the way in which they have been handled,” they wrote.

Selaine Saxby, Claire Coutinho and David Johnston were the latest lawmakers to tender their resignation on Wednesday.

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Naira

Naira Plunges to N621 at Black Market

The Nigerian Naira remained under pressure at the unregulated parallel market popularly known as the black market on Tuesday.

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Naira - Investors King

The Nigerian Naira remained under pressure at the unregulated parallel market popularly known as the black market on Tuesday. The Naira exchanged at N621 to a United States Dollar amid persistent foreign exchange scarcity.

At the Investors and Exporters’ forex window, the local currency dropped to N425.75 against the United States Dollar after opening the day at N422.25/US$1 on Monday. Forex traders in that segment of the forex market transacted $47.56 million in value and volume, Investors King reports.

However, Naira improved slightly against the U.S Dollar at the Central Bank of Nigeria (CBN) forex section. Naira exchange rate to dollar improved marginally from N415.86/US$ to N415.8.

Against the Pounds Sterling, the Nigerian Naira declined in value to N505.6544 from N500.6539. Similarly, against the European common currency, the local currency dipped slightly in value from N434.0331 to N434.7605.

Crude Oil

Oil prices dropped by $6 on Tuesday as concerns over the global recession containing demand outweighed supply concerns.

Brent crude oil, the international benchmark for Nigerian oil, declined by $6.65 to $106.85 a barrel while the U.S. West Texas Crude Oil lost $5.65 to $102.78 a barrel.

“Oil is still struggling to break out from its current recessionary malaise as the market pivots away from inflation to economic despair,” Stephen Innes of SPI Asset Management wrote.

Crude oil remains an important commodity for the Nigerian economy given its nature as a mono-product economy. Africa’s largest economy relies on crude oil revenue to service its economy and sustain its currency value against its global counterparts.

However, the inability to prop up crude oil production despite the increase in oil prices continued to hurt Nigeria’s foreign reserves and the availability of dollars in the economy. Hence, the Nigerian Naira is presently trading at a record low of N621 to a United States Dollar.

Cryptocurrency Exchange Rates

Global economic uncertainty ahead of the projected recession continues to dictate the performance of the cryptocurrency space in recent weeks.

Bitcoin extended its decline by 2.37% in the last 24 hours to $19,387.33 per coin. ETH, a token of the Ethereum protocol, lost 3.09% of its value to $1,079 a coin.

Meanwhile, Meta, formerly known as Facebook, has suspended its cryptocurrency project called Libra.  Celsius, a cryptocurrency lender, has paused withdrawals and announced plans to cut 150 jobs.

Cryptocurrency space market value dropped from over $2.5 trillion at its peak to about $900 million presently. The huge decline forced several players to cut losses and halt capital inflow into the cryptocurrency space.

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