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Forex Weekly Outlook September 26-30

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The US Federal Reserve on Wednesday left interest rate unchanged, even though the Federal Open Market Committee argued that the case for rate hike has strengthened, they agreed that further evidence of continued growth is needed to validate current economic progress. Also, the committee lowered its expectations for both inflation and economic growth this year, citing weak business fixed income and international developments (Brexit and slowdown in China) while hoping that “as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further” the 2 percent inflation target would be achieved.

However, housing starts declined by 5.8 percent to 1.14 million units in August, while building permits fell 0.4 percent to 1.14 million-unit rate. Even though, unemployment claims improved by 8,000 to 252,000 last week, the disparity in the data continued to create a mixed picture of the American economy. Particularly, when the drop in consumer spending that has been supporting the economy is factored-in. Hence, investors will look to seek clarity on future monetary policy when Fed Chair Janet Yellen and Federal Reserve Bank of St. Louis President James Bullard speaks on Wednesday.

Also, the data for durable goods, new home sales, consumer confidence and final GDP that are due this week are other key economic data needed to decipher the economic direction going forward.

In Japan, the Bank of Japan left interest rate unchanged, but took a different turn when it introduced “yield curve control”, a policy that was formulated to keep the 10-year Japanese government bond yield at zero percent from the usual negative yield (a situation where bond buyers pay to lend Japanese government money) to steepen the difference between the yields of short-term bonds (which are negative in Japan) and long-term bonds.

While some analysts have said the whole policy is a sign that the Haruhiko Kuroda led team is running out of policy options, it was implemented in an effort to increase banking activity and subsequently boost their profitability through wider spread in rates to arbitrage profits. This is because an increase in banking activity means greater economic activity and higher consumer prices, but because the detail of the yield curve control was vague it is hard to succinctly tell to what degree the BOJ planned to steepen the yield curve or if the apex bank will expand its stimulus.

Nevertheless, the industrial production declined by 0.3 percent from 0.0 percent recorded previously. This signaled that the world’s third largest economy is still struggling with weak exports due to the continuous gain of the Japanese yen that has sapped profits of manufacturing companies.

In Canada, the economy is not just running at a 10-month low inflation rate (0.2%) but also weak retail sales (-0.1%) as consumers are not spending even after the federal government revamped its child benefit plan and distributed cheques in July. The same month, the consumer spending dipped against a widely forecast increase in retail sales, this was after the economy recorded its worst contraction since 2009.  If global oil gut continued to weigh on growth, it is likely that the Bank of Canada will cut rates to stimulate the economy, maybe not in October meeting but in the fourth quarter if no improvement in key indicators.

Overall, the Bank of Japan will need the Federal Reserve to raise rates in order to halt the yen gains and boost its exports. However, the financial markets remained vague and highly speculative as central banks (US, Japan, Australia, New Zealand, Nigeria and South Africa) refrain from excessive stimulus, but without clear cut monetary policy. This week, NZDJPY and NZDUSD top my list.

NZDJPY

After the New Zealand’s second quarter GDP expanded at 0.9 percent three weeks ago, which was less than the 1.1 percent expected by economists. The New Zealand dollar has continued to slide against the Japanese yen, this I expect to boost the NZDJPY sell-off this week as Japanese yen continued to strengthen after the BOJ refused to expand its monetary policy.

nzdjpyweekly

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Technically, this pair has been selling for the past three weeks and lost 309 pips in total. This week, as long as 73.90 resistance holds I am bearish on NZDJPY with 72.34 as the first target and 69.94 as the second target.

NZDUSD

Although, various US data due this week could damp this pair outlook. I still believed that the US dollar is attractive enough to extend its gains against the New Zealand dollar. Nevertheless, it is advisable to monitor those data and FOMC speakers this week.

nzdusdweekly

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This pair peaked at 0.7484 three weeks ago, but since then it has lost 241 pips and closed as a bearish pin bar last week. This week, as long as 0.7362 resistance holds, I am bearish on this pair with 0.6989 as the target.

 

 

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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Forex

Akinwumi Adesina Extols Africans in Diaspora on Cross-Border Remittance

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African Development Bank (AfDB) President, Akinwumi Adeshina has extolled the tenacity and impacts of Africans in Diaspora on cross-border remittance.

According to the AfDB President, Africans in the diaspora are the continent’s largest financiers through their yearly remittances.

Speaking at an event organised by the Bank in collaboration with the African Union Commission, Adeshina noted that cross-border remittance into Africa is more than development assistance to the continent. 

Investors King earlier reported that remittance into Nigeria and other countries in the sub-Sahara Africa region hits $53 billion in 2022.

The AfDB President said, “The value of remittances from the African diaspora doubled from $37 billion in 2010 to $87 billion in 2019, reaching $95.6 billion by 2021. Yet official development assistance to Africa in 2021 was $35 billion, or 36% of the remittances from the diaspora”.

Adeshina added that Egypt and Nigeria are among the top-ten remittance recipients globally, with $31.5 billion and $19.2 billion, respectively in 2021. 

While speaking on the advantage of cross-border remittance to the African continent, the AfDB president noted that remittances have helped to meet financial, food, education, and health needs of many Africans, “it as well as serve as countercyclical sources of finance,” he said.

“The African diaspora has become the largest financier in Africa! And it is not debt, it is 100% gifts or grants, a new form of concessional financing that is the key for livelihood and security for millions of Africans” he added.

Similarly, Adeshina further positioned the need to eliminate premium charges on cross-border remittance into Africa. He noted that cross-border into Africa is twice what is it for South Asia.

He concluded that the Africans in diaspora can add more than remittance and investment, noting that they have skills, knowledge and know-how which can be needed for the development of the continent.

“They can help build world-class universities, and they can be mentors for the new generation of Africans,” he said. 

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eNaira

E-Naira Transaction Volume Rises to N5 Billion in November Amid Intensified Campaign

More Nigerians embrace eNaira wallet as CBN takes adoption campaign across the nation

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The Central Bank of Nigeria, (CBN) has disclosed that e-Naira transaction volume rose to a record N5 billion in the month of November following a series of campaigns initiated to encourage adoption.

Investors King had earlier reported how the e-Naira adoption team visited a number of parks in Abuja and the University of Lagos among other locations to drive the adoption of the digital currency. 

Speaking at the Second Edition of the Africa Cashless Payment Conference, CBN’s Director of Information and Technology, Hajiya Rakiya Mohammed noted that transaction on the e-naira platform does not attract any charges. 

She stated that Nigeria’s financial ecosystem is large to accommodate everyone.

Hajia Rakiya added that the e-Naira platform can be operated in any of Nigeria’s major local languages, stating that onboarding onto the e-Naira platform is a simple process. 

She further stressed that the primary goal of the e-naira is to reduce the amount of cash in circulation, thereby downsizing the cost of producing paper currency, increase in revenue and direct disbursement to citizens.

Meanwhile, the e-Naira circulation has reached N401.82 million as more Nigerians embraced the digital currency. 

It could be recalled that on October 25, 2021, CBN launched the e-Naira making Nigeria the first African country to have a digital currency. 

During the unveiling of the e-Naira in Abuja, President Muhammadu Buhari stated that the digital naira would increase remittances, foster cross-border trade, improve financial inclusion and enable the government to make welfare payments more easily.

On his part, the CBN Governor, Godwin Emefiele disclosed that the e-Naira offered Nigerians endless possibilities in using financial services. 

While admonishing more Nigerians to embrace the digital naira, Hajia Rakiya noted that “both banked and unbanked can use it, and it can be done through USSD *997#. We have integrated it with telecoms and NIBBS instant payments plus integration with money transfer operations so you can use e-naira for cross border”.

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Naira

CBN Will Redesign Naira Notes Every Five to Eight Years; Say Emefiele

The central bank will henceforth redesign the nation’s legal tender every five to eight years

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New Naira Notes

Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele has said the bank will henceforth redesign the nation’s legal tender every five to eight years.

The apex bank governor revealed at the unveiling of the new naira notes on Tuesday. 

Godwin Emefiele explained that the naira redesign is in line with global best practice noting that the naira needed to be redesigned and re-issued every five to eight years.

According to the CBN governor, previous administrations lacked the political will to approve the redesign of the naira notes. Stating that it is regrettable that the naira has not been redesigned for the past 19 years. 

“In the past, I have to confess that attempts by the CBN to redesign and re-issue the naira notes have been resisted. It is only President Muhammadu Buhari that has exhibited the courage to do so,” the CBN governor stated. 

Emefiele added that going forward, naira notes will be redesigned at intervals to address some peculiar issues. 

 “After today, the CBN will begin to redesign and reissue the naira every five to eight years,” he said. 

Investors King had earlier reported that President Muhammadu Buhari unveiled the redesigned naira notes at the Federal Executive Council (FEC) meeting today. 

Among those who joined the president with the unveiling include the CBN governor and the EFCC chairman.

Recall, in October, the CBN announced it will redesign the N200, N500 and N1,000 notes in line with its mandate.

Meanwhile, the CBN governor has disclosed that the new naira notes can not be counterfeited because of the features embedded in them. 

Similarly, he added that security agencies would be monitoring people making withdrawals at the counter to sniff out money laundering and unravel illegal usage. 

“The CBN has moved to a cashless economy. We will restrain the volume of cash someone will withdraw over the counter. We will follow up with the person’s data to know the reason for such withdrawal,” he concluded.

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