Last week, I had technical issues. So this week I am going to give an overview of the financial market post-election.
Since Donald Trump emerged the 45th president of the United State of America, a lot has changed in terms of how investors, businesses and traders approach the financial market. Here are possible effect of Donald Trump proposed policies on the world’s largest economy in relation to global foreign exchange market.
The president-elect plans to cut taxes by the most, and make changes to tax law, while this will help create more jobs and boost economic growth rate going forward, it will also widen the US trade deficit by about $1 trillion over a period of 10 years. This is likely to meet a stumbling block, since changing tax law requires approval of both houses of Congress, and Senate. Again, Federal Reserve Chair Yellen Janet has repeatedly warned of the consequences of running the economy with high deficit. According to her, with the debt to GDP ratio currently at about 77 percent, there is little to no room for additional fiscal measure should a shock to the economy occur. Hence, Trump is likely to push for minimal changes, like he announced on Obamacare after their meeting.
Accordingly, the Trans Pacific Partnership deal could suffer a setback after 7 years of painstaking negotiation. If Trump failed to realize the US equally needs the other 11 nations to bolster its weak manufacturing sector and offset the deficit created by a drop in the global commodity prices. For instance, a bilateral agreement between Australia and Japan, gives Australian beef exporters a price advantage over their American counterpart whose exports are subject to higher tariffs. According to the National Cattlemen’s Beef Association, without T.P.P the association is losing about $400,000 a day, now multiply that over hundreds of products and several dozens of free-trade relationships that is likely to be affected if Trump jeopardize the agreement. Not only would the 11 nations fight back, countries like China will restrict US products that can be produced locally from its market and support local manufacturers by forming an alliance with other nations like President Xi Jinping and Russia’s Vladimir Putin are already doing in Lima, Peru at Asia-Pacific Economic Cooperation summit in the South American city to negate the possible effect of TPP on their economy per adventure the US renege.
Subsequently, it will affect NAFTA trade agreement and visa attached to it. Also, if H-1B visa is overhauled as promised by the president elect during his campaign, the Silicon Valley will be the most affected as more than half of the US startups estimated at about $1 billion have an immigrant founder, and the companies getting the most of H-1B visa, with about 80,000 granted every year to these companies.
Likewise, the US is home to about 15 million immigrants with 11 million of those undocumented. While Trump won’t build walls, he has pledged to aggressively enforce existing laws towards undocumented residents and deport about 3 million, this includes identification checks which could substantially hurt some of the US industries, like agriculture, foodservices and hotels, that depend largely on undocumented lowly paid immigrants to function. This move, will impact services sector that has aided the economy since recession and disrupt Trump proposed increase in productivity as unemployment rate is near all-time low, and has forced employers to raise wages to retain and attract desirable employees.
The US economy remains vibrant after a series of positive economic data shows continuous growth post-election, and a surge in inflation towards Fed’s 2 percent target. Although, producer prices were unchanged in October due to drop in services cost, data showed more jobs were being created even with rising wages. This was further validated by a 40-year low unemployment claims (235,000) recorded in the week ended Nov.11, while consumer spending remains strong following a 0.8 percent increase in October and 4.3 percent on a yearly basis.
This, has increased the odds of the Fed raising interest rate in December to almost 100 percent – especially with the Federal Chair signaling possible rate hike if incoming data provide further evidence of continued growth. This week, the US dollar is expected to gain against its counterparts as investors continue to jump on it in anticipation for possible rate hike. However, traders are advised to pay attention to the U.S political event in case Trump makes comments that could halt current gains.
In the UK, consumer prices unexpectedly rose (0.9%) less than forecast in October even with the weaker pound. However, consumer spending rose more than expected to 1.9 percent, suggesting household spending is still strong. Accordingly, unemployment rate fell to 4.8 percent in the third quarter, its lowest in 11 years. Nevertheless, the number of jobs added (49,000) was half the number expected and down from 172,000 jobs added in the second quarter, indicating the labour market might be cooling, with employment growth slowing as Prime Minister Theresa May’s March 2017 date for triggering article 50 of Brexit approaches. The U.K. uncertainty and risk remain high as investors and businesses awaits EU-U.K deal ahead of official Brexit.
Overall, the financial markets remain uncertainty as the world awaits Italy referendum alongside Brexit deal and the U.S new president that has sworn to change current policies. This week, AUDUSD and NZDUSD top my list.
Last month, I mentioned this pair sell opportunity, but after hitting our first target at 0.75059 it rebounded, reaching as high as 0.7777 last week. This week, with the odds of the Fed’s raising rates jumping to 100 percent from 68 percent in the previous week, this pair is likely to continue its downward trend towards 0.7203 support. Another good reason is that the Aussie dollar is a natural safe haven, but as investors are increasing their US dollar holding, demand for the Australian dollar is expected to drop this week.
This week, as long as 0.7379 resistance holds, I am bearish on AUDUSD with 0.7203 as the target.
Also, this pair sell opportunity was discussed weeks ago, and since then this pair has lost 402 pips, but I think this pair has room for additional 409 pips, if 0.6989 support, below the ascending channel started over a year ago is broken this week. This week, I will be looking to sell below the 0.6989 for my first target 0.6771 and then 0.6580 second target.
Akinwumi Adesina Extols Africans in Diaspora on Cross-Border Remittance
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.
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
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”.
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
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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