- Forex Weekly Outlook October 16-20
The mixed U.S. economic data and political uncertainty continued to weigh on the U.S dollar. Even though activities in the manufacturing sector rose to a 13-year high in September and services sector expanded at the fastest pace in 12 years last month, the consumer prices rose just 0.5 percent in the month, below the 0.6 percent projected by experts. Suggesting that increased job creation in these sectors has failed to pressure prices enough to validate Federal Reserve’s price projection.
This is one of the reasons the U.S. dollar dipped against its counterparts on Friday and likely to continue this week after President Trump disavow Iran’s deal. However, the weak US dollar should deepen industrial production as seen in August and September, while Saudi Arabia’s decision to cut crude oil export by 560,000 barrels per day in November is expected to further boost gasoline prices and subsequently pressure headline inflation towards the Federal Reserve’s 2 percent target in the final quarter of 2017.
However, the underlying fundamental factors would be temporary in accordance with Federal Reserve’s minutes of September 19-20 that showed policymakers are unclear if factors subduing inflation are just temporary or persistent. Therefore, agreed that incoming data are imperative to rate decision.
Also, even though the odds of rate hike in December may increase with the rise in headline inflation figure, the US dollar may not respond proportionally for two reasons; December rates hike has already been priced in, two, growing uncertainty in the U.S. and President Trump’s inability to push through with tax cut just yet will weigh on the US dollar attractiveness.
Therefore, growing political uncertainties in the country and across the world remains a concern, especially with the whole Euro-area facing populist uprising amid stagnant Brexit negotiation.
This week, I will be looking at AUDJPY, and NZDJPY, NZDUSD, and AUDUSD from last week.
The Australian economy is struggling with weak retail sales and growing household debt that has eroded consumer spending power. However, weak iron ore price, the largest Australian export product also weigh on the economic outlook but investors and businesses are more concern about the Reserve Bank of Australia’s decision to maintain current monetary policy against other nations cutting back on stimulus amid improved global growth.
Despite these headwinds, the Australian dollar remains resilient in strong demand after dropping below 88.17 two weeks ago. One, because of the rebound in China’s import to 18.7 percent in September. Two, the surge in the attractiveness of emerging currencies following the less than expected consumer prices and the president Donald Trump refusal to sign Iran’s deal bolstered Australian dollar attractiveness last week as investors are risk-averse.
However, while the currency has been favoured by growing uncertainties and improved global economic outlook, the Aussie dollar remained overpriced as stated previously and expected to dip against strong currencies like the Japanese yen, backed by strong and growing economic fundamental.
Therefore, despite the Japanese snap election due on October 22, I don’t see the AUDJPY topping the 22-month high of 90.29 after the bearish pin bar established 4 weeks ago. This week, as long as price remains below the 90.32 resistance level, I am bearish on this pair and will look to sell below 88.17 for 86.34 targets.
Improved emerging markets’ outlook bolstered the attractiveness of emerging currencies last week. While I doubt these currencies can sustain current upsurge against the US dollar and Japanese Yen in the long term. I will be standing aside this week to better assess price action and price in Chinese inflation number and revised Japanese industrial production due on Monday.
Similarly, I will be staying away from the EURUSD because of the low volume of trade and surge in risk level due to the growing uncertainty.
This pair failed to break the ascending channel last week. However, with the New Zealand inconclusive election, I do not see NZDJPY sustaining current bullish momentum for long. Therefore, I will be standing aside this week to monitor price action but would be selling at the first sign of wane as long as price remains below 81.02 levels.
The weak US consumer prices aided the attractiveness of the Aussie dollar against the US dollar last week. This week, I will be assessing the response of the parliament and the rest of the world to President Donald Trump’s refusal to sign Iran’s deal on Friday and how this plus China’s consumer prices due on Monday will change AUDUSD outlook going forward. Again, I am bearish on this pair on a long-term as I believe Australian dollar is overpriced but the heightened uncertainty continued to weigh on that projection, hence, the reason I am standing aside this week.
Similarly, the New Zealand currency surged on growing emerging markets attractiveness and weak US dollar. But while Chinese new credit control policy is projected to affect exporting partners like New Zealand, the currency remains resilient amid rising commodity prices. again, I believe the rebound is temporary and merely aided by the US uncertainty. Therefore, the reason I am bearish on this pair as long as price stays below 0.7214, but I would be standing aside this week to better monitor price action and sell at the first bearish continuation signal.
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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