- Forex Weekly Outlook October 17-21
The US dollar gained against most of its counterparts last week, despite the consumer confidence index (87.9) falling to a year low in September. The economy continued to create jobs by maintaining a four decade low unemployment benefits at 246,000 in the week ended Oct.8, same as previous week.
Also, consumer spending rebounded in September surging 0.6 percent from previously declining 0.2 percent in August, while the producer price index rose 0.3 percent for the first time in three months, indicating that consumer prices may be picking up as the increase in costs (energy and food) are pass-on to consumers.
This is one of the reasons consumer confidence dropped in the said month, as consumers are likely to react to increase in costs, and also it explained Fed’s position as to why aggressive steps “high-pressure economy” may be needed to lower unemployment further and boost consumption simultaneously, even if it means at a higher inflation rate.
Accordingly, the Fed Chair Yellen Janet during 60th annual economic conference in Boston, Massachusetts on Friday noted that extreme economic events like the world is currently experiencing have challenged existing economic views in terms of what drive growth (demand and supply).
While, admitting this will necessitate further research from the profession and the Fed, she said there were evidences from post-financial crisis that aggregate increase in demand lead to appreciable effect on aggregate supply against widely accepted notion that an economic output over the long-term is equal to its resources (labour, costs and existing technologies).
This was because at a more accommodative monetary policy (interest rate 0.5%), unemployment rate has remained nearly stagnant and so is the output. Therefore, throwing the possibility of a December rate hike in doubt, especially saying that the influence of the labour market, that the financial markets thought will force the Fed to hike rates to curb inflation above its 2 percent target, on inflation rate is weaker than had been commonly thought prior to the financial crisis. However, consumer prices report due on Tuesday and building permit of Wednesday will help assess the level of inflation so as to determine how close to target the Fed really is and economic growth.
In China, producer prices rose 0.1 percent for the first time in five years, bolstering consumer inflation to 1.9 percent in September. However, exports fell 10 percent from a year earlier, reducing the world second largest economy’s trade surplus to $42 billion, even with weaker Yuan. This suggested that weaker Yuan have little effect on exports as the global slowdown has impacted shipments from both the European Union and United Kingdom. For instance, exports to the EU has dropped 9.8 percent, while that of U.K. and U.S have declined by 10.8 percent and 8.1 percent respectively.
While the probability of exports turning positive is high due to continuous weakening of the Yuan by the Chinese central bank and the usual surge in Christmas orders, sustainability remains the question. Next week, third quarter GDP report, industrial production, fixed asset investment and National Bureau of Statistics (NBS) due on Wednesday will further throw light on the state of Chinese economy going forward.
In the UK, the sterling continued its decline against the US dollar and has so far lost 6 percent this month and down 17 percent this year. While Goldman Sachs and other analysts have said the embattled currency is still in for more punishment, the lower exchange rate will boost oversea orders and pressure consumer prices (inflation) above the Bank of England (BOE) 2 percent target.
This, will likely prompt BOE to either shun rising inflation and concentrate on growth as suggested by Mark Carney last statement on the economic outlook or attempt to curb inflation and risk growth. Inflation rate, producer prices, average earnings, consumer spending and unemployment rate are due this week, but these macro data are likely to have no positive effect on the economy as long as the confidence in the British market remains weak.
Overall, I expect the US dollar to lose some ground this week as investors look to understand Fed’s statement on the economy and come to terms with the possibility of the apex bank maintaining current interest rate while monitoring improvement across key sectors. This week I will be looking at CADJPY, USDCAD and EURNZD.
This pair plunged to four year low last month, largely due to the Yen continuous gain and low oil prices that weigh on oil-dependent loonie. But after OPEC members agreed to cut production in September the pair halted losses and has since gained 386 pips. Although, Canada economic data remain weak, there is a possibility that a rebound in oil prices will fuel an increase in investment and improve exports.
Technically, after a bullish pin bar was formed three weeks ago and the failure of the pair to break 77.05 support a week later showed this pair has halted the downward trend. But a sustained break of 79.23 resistance is needed to validate the bullish trend. This week, as long as price remains above 79.23, I am bullish on this pair this week with 82.05 as the target.
With the US dollar posed to retreat this week, coupled with the Russia and Saudi Wednesday’s agreement in Turkey to go ahead with production cut, this pair is expected to extend its decline this week. This week, I am bearish on this pair as long as 1.3142 holds with 1.3033 as the target.
With the euro-single currency enmeshed in Greece debt and Brexit issues this pair will likely extend its decline this week – especially if last week bearish pin bar is taking into consideration. This week, as long as price remains below 1.5469 I am bearish on this pair this week with 1.5180 as the first target.
The EURUSD hit our first target at 1.1019 last week, but this week I will be standing aside on this pair to evaluate Euro-area economic situation in relation to how the financial markets react to the greenback after Fed’s speech.
AUDUSD touched our 0.7505 target and immediately lost most of its gains for the week. This week, I will be standing aside on Aussie to monitor market reaction to its current position for two reasons, one, the Aussie dollar does not have much room to grow on the bullish side considering its nearing 78.34 US cents, its one-year peak. Two, the US dollar is likely to give up part of its gains so far this week, and with buyers adding to their long positions without substantial data to explain the reason for Thursday and Friday attractiveness. I will be standing aside to better assess the situation.
This pair was 44 pips short of hitting our target at 0.6989 last week, but this week I will be waiting for confirmation of trend continuity to sell per adventure Kiwi extend its decline against the greenback, but for now I will be standing aside also, while monitoring data from RBNZ and market reaction to the current position of this pair.
Naira Gained Slightly at I&E Forex Window to N412.81/$US
Despite the Nigerian Naira trading at a record-low across the nation’s unregulated black market, the embattled currency opened slightly higher at N412.81 to a United States Dollar on Monday at the Investors and Exporters Forex Window, representing an increase of 0.08 percent when compared to the N412.88 it closed on Friday.
The improvement in Naira value was after the Central Bank of Nigeria (CBN) directed all depoisit money banks operating in the country to freeze bank accounts linked to Oniwinde Olusegun Adedotun, the founder of www.abokfx.com, a forex rate publishing platform.
Godwin Emefiele, the Governor, CBN had blamed black market and bureau de change operators for the constant plunge in Naira value against its global counterparts and insisted that forex rates remained the apex bank stipulated rates and not the unregulated rates imposed by speculators and hoarders and published to the public by Abokifx and other business platforms.
“There was a particular time I asked our colleagues to call the so-called owner of abokiFX, that we want to understand his model and how he came about advertising those rate, we find him as someone, a Nigerian who lives in England and conducts this nefarious activity on our economy.
“It is economic sabotage and we will pursue him, wherever he is, we will report him to international security agencies, we will track him, Mr Oniwinde, we will find you, because we cannot allow you to continue to conduct an illegal activity that kills our economy.” Emefiele said.
The governor further stated that the website was set up primarily manipulate and speculate forex rates. He said “they get naira loans, use to purchase dollars, take a position, change the rate over a given period, sell the dollars they purchased and make a profit, this is completely illegal, unacceptable and we will pursue them.”
On Friday, the last time Abokifx published unregulated forex rates, Naira was qouted at N570 to a United States Dollar while the British Pound and the Euro were quoted at N770 and N655, respectively.
U.S Dollar Jumps to Three Weeks High on Better Than Expected Retail Sales
The United States Dollar rose to a three-week high after data from the Commerce Department showed that the U.S retail sales rebounded in the month of August despite falling consumer confidence.
The US Dollar Index rose to 93.40 on Monday to extend Friday breakout above the 93.00 key resistance level.
U.S retail sales jumped to its highest in five months in the month of August to beat 0.8 percent decline predicted by experts. Retail sales grew by 0.7 percent in August to increase the odds of the US Federal Reserve announcing tapering during next week’s Federal Open Market Committee (FOMC) meeting.
“U.S. consumption is not slowing as quickly as it appeared a month ago despite the fading stimulus, and the Delta variant did not much affect the industries feeding into retail sales,” said Chris Low, chief economist at FHN Financial in New York. “The economy continued to hum in August.”
Against the Japanese Yen, the U.S dollar strengthened to 109.48 from 109.91 attained on Friday on broad-based selloff during London trading session, while heavy selloff plunged British pound against the U.S dollar 1.36610 before reboundling slightly to 1.36946.
The Euro dropped from 1.17883 recorded on Friday to 1.16995 on Monday during London trading session.
Naira Exchange Rates Today, Friday, September 17, 2021
Naira continued its downward trend against other currencies on Friday as it plunged to N570 against the United States Dollar at the black market. The local currency traded at N770 and N655 to British Pound and Euro, respectively.
Persistent forex scarcity amid a series of in effective policies have made access to forex impossible for most of businesses that operates in largely import dependent African biggest economy.
Nigeria’s forex reserves, the means in which the nation, service its dollar consuming 200 million population has been on a decline in recent weeks despite crude oil trading at over a year high of $73 a barrel. Some of the factors that have crippled the ability of central bank to cushion the economy with enough forex is low crude oil production, partly due to production cap, weak local manufacturing sector that has made the nation a huge import dependent economy, the ongoing crisis between herders and farmers, rising costs even with falling inflation, etc.
At the bureau de change section, Naira exchanged at N565, N775 and N655 to a United States Dollar, British Pound and Euro common currency.
The Central Bank of Nigeria (CBN) had stopped the sale of forex to the bureau de change operators to plug forex leakages and curb activities of criminal elements, the decision has worsen forex availability. See other forex rates below.
Naira Black Market Exchange Rates
Morning * Midday** Evening *** Final Rates
Bureau De Change Naira Rates
Central Bank of Nigeria’s Official Naira Rates
|9/16/2021||SOUTH AFRICAN RAND||28.3101||28.3446||28.3792|
N.B: These tables are updated three times a day.
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