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Forex Weekly Outlook July 10-14

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  • Forex Weekly Outlook July 10-14

The US economy added 222,000 jobs in June to sustain the ongoing solid labor market. However, the unemployment rate rose to 4.4 percent from 4.3 percent, while the wage growth rate climbed just 0.2 percent, below the 0.3 percent predicted by most experts. Suggesting that while employers were creating jobs, they were not increasing wages as expected.

Also, even though, data showed services sector expanded faster than projected in June and that the odds of the Federal Reserve raising rates have surged, the dollar remains unattractive as both the uncertainty surrounding North Korea and President Donald Trump’s inability to push through with tax cut and health care reform with the parliament continued to weigh on investors’ confidence and optimism.

In the U.K, the economy has started showing signs of slowdown after data showed services sector expanded marginally from 53.8 to 53.4 in June, manufacturing sector slowed to a 3-month low of 54.3 in the same month and consumer-confidence fell to a year low, while housing price increased at the slowest pace in four years.

All these figures showed slowing consumer spending and low investments in the country even with record low exchange rate, the weak currency has not done enough to boost business activities.

In Japan, the economy continues to grow, however, weak inflation rate and low wages are disrupting Bank of Japan’s interest rate strategy.

Forcing the central bank to lower its inflation rate forecast and maintained current stimulus level against investors’ rates hike expectation.

Also, in a surprise turn of event, Shinzo Abe’s Liberal Democratic Party was defeated in Tokyo Assembly election. Sending signal that the people are tired of Abe’s strategy, instead, the people want the administration to focus on boosting the economy.

Overall, the global economy has picked up. However, the uncertainty in the U.S, U.K and the rest of the world continue to weigh on growth. The Euro-area remains strong and the Euro-single currency is expected to continue its run against most currencies this week.

This week NZDCAD, GBPCAD, and CADJPY top my list.

NZDCAD

In May, I mentioned the potential of this pair following Canada’s growing economic data. But the fall in global oil prices and uncertainty surrounding trade agreement between the US and Canada impacted the loonie outlook against the Kiwi.

However, the expected rates hike from the top central banks including the Bank of Canada has bolstered Canadian dollar attractiveness against emerging currencies like the Kiwi.

Forex Weekly Outlook July 10-14

Technically, the pair has lost 408 pips since peaking at 0.9756, and last week it broke key support level of 0.9382 after data showed that the Canadian economy added 45,300 jobs in June. This is three times the 11,400 jobs projected by experts and improved the unemployment rate to 6.5 percent from 6.6 percent.

Therefore, the renewed interest in Canada’s economy will continue to aid the loonie attractiveness as investors increase their bond holding ahead of rates hike. While the New Zealand economy along other emerging economies will struggle with an increase in fund outflow for the remaining half of this year. Hence, the reason I remain bearish on the pair with 0.9298 as the target, a sustained break should open up 0.9161 support levels.

GBPCAD

The GBP plunged against the Canadian dollar on Friday, extending its loss further. This is because the U.K. economy has started slowdown as the political uncertainty in the region worsen after Theresa May failed to win majority votes in June.

On the other hand, the Canadian dollar gained from growing labor market and improving manufacturing sector.

Forex Weekly Outlook July 10-14

Technically, since 5th of May, this pair has plunged by 1289 pips as shown by the descending channel above. This week, I will expect the Canadian dollar to continue its gain against the pound sterling towards our first target, 1.6497. And expect a sustained break to attract enough sellers to open up 1.6353 targets.

Weekly Recap

CADJPY

Forex Weekly Outlook July 10-14

Three weeks ago, I mentioned this pair and explained that the hawkish view of the Bank of Canada would bolster the loonie outlook against the Japanese yen after Haruhiko Kuroda led Bank of Japan announced it will maintain current stimulus level. Since then our target 1 was hit two weeks ago at 86.36, but with the continuous gain of the Canadian dollar, I will expect a sustained break of 88.90 resistance levels to open up 90.80 targets 3.

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.

Naira

Naira Exchange Rates; Monday, May 17, 2021

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Naira - Investors King

The Nigerian Naira opened the week at N484 to a United States Dollar on Monday at the parallel market. The local currency remained stable against the  British Pound at N678 and N581 to a single Euro.

Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
17/05/2021 480/484 670/678 577/581 62/68 390/402 292/320
14/05/2021 480/484 670/680 576/581 62/69 390/400 292/320
13/05/2021 479/483 665/673 576/581 62/69 391/402 292/320
12/05/2021 479/483 665/673 576/581 62/69 395/400 292/320

Bureau De Change Naira Rates

Date USD GBP EURO
NGN BUY/SELL BUY/SELL BUY/SELL
17/05/21 475/482 670/677 575/584
15/05/21 475/482 670/677 575/584
14/05/21 475/482 670/677 575/584
13/05/21 475/482 665/674 573/584
12/05/21 475/482 665/674 573/584

Central Bank of Nigeria’s Official Naira Rates

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Forex

Nigeria’s Diaspora Remittances Decline by 28 Percent to $16.8 Billion in 2020

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US dollar - Investors King

Nigeria’s diaspora remittances declined by 27.7 percent or $4.65 billion from $21.45 billion in 2019 to $16.8 billion in 2020, according to the World Bank Migration and Development report.

A critical look into the report shows remittances to sub-Saharan Africa declined by 12.5 percent in 2020 to $42 billion. This was largely due to the 27.7 percent recorded by Africa’s largest economy, Nigeria, which accounted for over 40 percent of the total remittance inflows into the region.

The report noted that once Nigeria’s remittance inflows into the region are excluded, remittances grew by 2.3 percent in 2020 with Zambia recording 37 per cent.

Followed by 16 percent from Mozambique, 9 percent from Kenya and 5 percent from Ghana.

The decline was a result of the global lockdown that dragged on the livelihood of most diaspora and unclear economic policies.

In an effort to change the tide, the Central Bank of Nigeria (CBN) introduced a Naira 4 Dollar Scheme to reverse the downward trend and boost diaspora inflows into the economy.

However, the reports revealed that other external factors like insecurities, global slow down, weak macroeconomic fundamentals, etc continue to discourage capital inflows.

On Tuesday, the CBN, in a new directive, announced it has halved dollar cash deposit from $10,000 to $5000 per month.

The move is geared towards discouraging overreliance on the United States Dollar and encourage local patronage and production.

Mr. Guy Czartoryski, Head of Research at Coronation Asset Management, had said in the report, “We looked at the top 10 banks and the breakdown of their deposits showed that 40 per cent of their deposits are in dollars and it is quite astonishing.”

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Forex

Deposit Money Banks Reduce Dollar-Cash Deposits by 50 Percent to $5000/Month

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United States Dollar - Investors King Ltd

Nigeria’s Deposit Money Banks (DMBs) have reduced the amount of United States Dollars that customers can deposit into their domiciliary accounts by 50 percent from $10,000 to $5,000 per month.

A bank official who preferred not to be mentioned confirmed the new policy to Investors King.

He, however, stated that the new policy does not apply to customers making electronic transfers as well as oil and gas companies and dollar payments into government accounts.

Checks revealed that the Central Bank of Nigeria (CBN) introduced the new policy to discourage the strong appetite for the United States Dollar, which has continued to rise.

A recent report has shown that despite persistent dollar scarcity, around 40 percent of bank deposits in the nation’s top ten banks were in dollars.

Mr. Guy Czartoryski, Head of Research at Coronation Asset Management, had said in the report, “We looked at the top 10 banks and the breakdown of their deposits showed that 40 per cent of their deposits are in dollars and it is quite astonishing.”

According to an analyst at ARM Securities Limited, Mr. Olamofe Olayemi, “this has to do with how much confidence the people have in the naira. Over time, we have seen significant depreciation in the naira.

“If you look at what happened in 2020, no one expected that the naira would be devalued twice in that year and even the outlook, this year is suggesting further depreciation in the naira.

“So, it makes sense to a lot of people to store their money in dollars. But, from the CBN standpoint, you agree with me that there is dollar scarcity.”

He, therefore, argued that the new policy might discourage financial inclusion and encourage cash outside the banking system.

Again, it is important for the flow of money to be captured in the system,” he said.

The CBN had extended its Naira 4 Dollar Scheme last week to further encourage dollar inflow into the Nigerian economy.

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