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Forex Weekly Outlook February 20-24

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U.S dollar - Investors King
  • Forex Weekly Outlook February 20-24

The US dollar gained against its counterparts last week, after data showed producers price index rose 0.6 percent and inflation also surged 0.6 percent in January. Buttressing the general perception that increased in gasoline cost will pressure consumer prices above the Fed 2 percent inflation target and force the FOMC to adjust interest rates.

However, wage growth remained below projection, plunging to 2.5 percent from 2.8 percent recorded in December, which is capable of hurting consumer spending (0.4%) that has been supporting the economy if the Fed hike rate with declining wages. Therefore, it’s unlikely the fed will move this March as widely speculated, however, Trump new tax policy due to be announced this week can change this view.

On tax policy, the possibility of law makers cutting corporate tax to 20 percent from current 35 percent and the Fed’s hawkish outlook boosted the attractiveness of the US dollar last week. Although, retail business owners are worried that the proposed border tax on import goods will hurt revenues and subsequently affect wages, law makers insisted it will help generate about $1 trillion needed to reduce the deficit. Hence, it is hard to quantify or deduce the US dollar direction ahead of new tax policy.

In the UK, the consumer spending (0.3%) that has been supporting the economy dropped for a third consecutive month in January, signaling that post-Brexit resilience is gradually coming to an end as high consumer prices (food and fuel) seems to have started hurting purchasing power even before March – stipulated date for triggering Brexit.

Consequently, job creation is gradually slowing down, according to the statistics office report for the final quarter of 2016. Also, pay growth fell to 2.6 percent in the same quarter, while labour market is still strong, the pace has cooled in recent time over Brexit uncertainty. Therefore, this is expected to weigh on the British Pound and render it unattractive as investors continued to look elsewhere to avert lost.

In New Zealand, consumer spending remains steady in the last quarter of 2016. Rising 0.8 percent, but the New Zealand dollar declined against its counterparts after RBNZ governor said the continuous gain of the currency could impede growth. Prompting traders to sell-off the haven currency. Overall, the global financial market remains vague ahead of Europe uprising and uncertainty in the US.

This week, GBPUSD and NZDJPY top my list.

GBPUSD

The series of events happening in the Euro-area continued to weigh on the pound outlook. However, Brexit and drop in consumer confidence standout. Whereas the US dollar remained strong and likely to continue so.

Forex Weekly Outlook February 20-24

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Technically, after the pair peaked at 1.2773 in December, its highest post-Brexit, it has lost about 363 pips and failed to top 1.2704 price levels attained this February. Again, the pair is trading below 20-days moving average on the daily candlestick and closed below weekly 20-days moving average, after the doji formed two weeks ago. Indicating the pressure is on the downside as the U.K. prepare to trigger article 50 next month.

Forex Weekly Outlook February 20-24

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This week, I am bearish on GBPUSD as long as 1.2500 holds and will be looking to sell below 1.2426 price levels for 1.2297 targets, a sustained break should open up 1.2148 in days to come. But a negative comment or perceived negative new policy from the U.S. can void this analysis as the world await Trump new tax policy.

NZDJPY

Last week, I wrote extensively on the New Zealand dollar outlook. While the economy remains strong and well-supported by the surging commodity prices, traders seem to be selling the pair after Governor Graeme Wheeler statement on the danger of high foreign exchange to the economy.

Forex Weekly Outlook February 20-24

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The pair called the top at 83.79 price levels, its 8-month high, and dropped 280 pips to close at 81.07 price levels. One of the reasons this is a good sell is the renewed interest in the Japanese yen as investors scramble for safe-haven assets ahead of numerous changes that will be taking place across the Group 8 nations. Again, I don’t think the pair is attractive enough to top its 8-month high after RBNZ statement. Hence, I am bearish on this pair this week and will be looking to sell below 81.02 support for 78.83 targets, a sustained break should boost its attractiveness for 76.23 targets 2.

Last Week Recap

NZDUSD closed below the channel last week but failed to meet our target of 0.6989. However, I remain bearish on NZDUSD this week, one, for the reasons stated above, and two, the continuous gain of the US dollar should aid NZDUSD bearish move below 0.7124 support levels, that also serves as 20-days moving average.

Forex Weekly Outlook February 20-24

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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.

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CBN Raises Customs Forex from N381/US$1 to N404.97/US$

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Institute of Chartered Shipbrokers

The Central Bank of Nigeria has raised the Naira exchange rate for cargo clearance from N381/US$1 to N404.97/US$1.

This was confirmed by Uche Ejesieme, the Public Relations Officer (PRO), Tin Can Island Customs Command.

The PRO explained that it was not the customs job description to raise the foreign exchange rate but that of the central bank.

The N24 difference has been implemented on the customs system managed by Web Fontaine.

Commenting on the situation, Kayode Farinto, the Vice President of the Association of Nigerian Licensed Customs Agents, said the increase would further escalate inflation on import goods and hurt consumers’ buying power given the present economic situation.

An importer, Gboyega Adebari, who was shocked at the decision said stakeholders will be greatly affected by the decision.

According to him, “When we went to assess a job this morning, we were told that the exchange rate has been increased, though we have been expecting it, but we don’t expect that it would be so sudden. The implication of this on cargo clearance is that cost of clearance would increase by N24 difference.

“The cargoes that already enroute Nigeria would also be affected, the jobs that we want to clear this morning were affected.

“When you go back to the importer and request for money, they will tell you there is no notification of increase from customs, so the freight forwarders are the ones that would bear the additional cost.”

Naira plunged to N502 against the United States Dollar at the parallel market on Wednesday and traded at N715 to a British Pound and N605 against the European common currency, Euro.

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Naira Hits N502 Against U.S Dollar at the Black Market

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Naira - Investors King

Persistent dollar scarcity amid devaluation and economic uncertainties plunged the Nigerian Naira to N502 per U.S Dollar at the parallel market, popularly known as the black market.

The local currency traded at N715 to a British Pound and N605 to a Euro on Wednesday morning.

At the Nigerian Autonomous Foreign Exchange Rate Fixing Methodology (NAFEX), the Naira opened at N411.15 to a United States Dollar before dropping to as low as N421.96 and eventually closing at N411.5.

The Central Bank of Nigeria had adopted the NAFEX rate as the nation’s official rate when it became clear that the apex can no long sustain Naira’s fixed-rate amid dwindling foreign reserves and weak revenue generation.

The NAFEX rate, popularly known as the Investors and Exporters Forex Window, was quoted as N410.15 to a United States Dollar on Tuesday, June 8, 2021 on the central bank’s official website.

The apex bank decision to devalue the Naira despite the ongoing economic challenges in Africa’s largest economy was because of the pressure from the World Bank and the International Monetary Fund, demanding the federal government to allow forces of demand and supply to determine the naira exchange rate against pegged Naira-USD rate.

However, with the Federal Government looking for approval from the two multilateral institutions for fresh loans, it became necessary to enforce those demands before new loan applications could be approved.

The World Bank raised Nigeria’s growth rate from 1.1 percent to 1.8 percent in 2021, saying a series of structural reforms and market-determined exchange rates will help boost economic activities.

Also, oil prices were projected to remain high in the near term.

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South African Reserve Bank Imposes Administrative Sanctions on Authorised Dealer in Foreign Exchange with Limited Authority

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South African Rand - Investors King

The South African Reserve Bank (SARB) has imposed administrative sanctions on Master Currency (Pty) Limited, an Authorised Dealer in foreign exchange with limited authority (ADLA).

Authorised Dealers in foreign exchange (commercial banks) and ADLAs are persons authorised by the SARB to deal in foreign exchange transactions and are regulated accordingly. ADLAs include bureaux de change and are authorised to deal only in certain limited, designated foreign exchange transactions, including travel-related transactions.

The Financial Intelligence Centre Act 38 of 2001 (FIC Act) mandates the SARB to ensure that ADLAs have adequate controls in place to combat acts of money laundering and the financing of terrorism. Flowing from these responsibilities, the SARB inspects ADLAs to assess whether they  have  appropriate measures in place,as required by the FIC Act.

The administrative sanctions were imposed after the SARB conducted inspections at Master Currency (Pty) Limited, in terms of the FIC Act. The inspections found weaknesses in the control measures the ADLA, Master Currency (Pty) Limited, had in place to control anti-money laundering and combating the financing of terrorism.

It should be noted that the administrative sanctions were imposed because of certain weaknesses that were detected in the ADLA’s control measures which inhibited the ADLA from proactively detecting financial crime, and not because it was found to have facilitated transactions involving money laundering or the financing of terrorism.

The administrative sanctions imposed are as follows:

  • a financial penalty of R100 000 in terms of section 45C(3)(e) of the FIC Act, for failing to provide ongoing training to employees to comply with the provisions of such Act in terms of section 43 thereof; and
  •  a directive in terms of section 45C(3)(c) of the FIC Act, to provide the requisite refresher training at all branches, and to submit confirmation and evidence that such training has been conducted and will continue to be conducted on an annual basis.

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