The US labor market added stunning 255,000 jobs to the payrolls in July, even with an uninspiring 1.2 percent second quarter GDP growth rate and weaker than expected orders. The labor market doesn’t seem to be slowing down anytime soon. Both wages and average work week also surged in July, confirming the strength of the jobs created as it cuts across manufacturing, healthcare, retails, temporary-help agencies and leisure and hospitality industries.
Even though, the unemployment rate remains low at 4.9 percent in July. The General concerns remain the divergence between the US labor market and the economic growth rate. While labor market is skyrocketing, the economic growth is below 2.6 percent expected by economists in the second quarter — raising questions about the US economic outlook in 2016, if it will be enough to raise rates this year.
Nevertheless, the US dollar gained part of its losses against all its counterparts on Friday.
In the United Kingdom, the Bank of England cut rates by 25 basis points to record low on Thursday and extends stimulus to safe the economy from the aftermath of the Brexit. The pound has since lost about 1.7 percent against the dollar to 1.3061.
While the Reserve Bank of Australia also lowered its official cash rate by 25 basis points to contain surging Aussie dollar and boost exports as explained last week, but sadly the local currency continued to gain against the US dollar after investors abandoned the greenback for the Japanese yen prior to the job report released on Friday. Prompting economists to think the RBA will have to do more to get its consumer prices up.
This week, the Reserve Bank of New Zealand is widely expected to cut rates by at least 25 basis points from current 2.5 percent to 2 percent on Thursday, and another 25 basis points in November to 1.75 percent if Kiwi gains must be capped and inflation target met. The RBNZ Governor Graeme Wheeler said earlier that the higher exchange rate is damping the growth outlook and that action will be taken as deem appropriate.
In Canada, a total of 31,200 jobs were lost in July and trade balance deficit dipped to 3.6 billion in June, more than 2.6 billion expected, while the unemployment rate rose to 6.9 percent. The Canadian dollar tumbled the most since June on Friday, after the nation’s labor market showed the most jobs were lost since November 2015. Yes, things are not looking good for the loonie, especially with weak consumer spending, weak manufacturing sector and falling oil prices.
This week, EURUSD, USDCAD, USDCHF and AUDUSD top my list.
For the past six weeks this pair has top my list, largely because the greenback is the most balanced currency with clear cut policies to envisage future occurrences. While Euro-single currency has struggled since the U.K. exit the European Union, currently the Euro-manufacturing sector is moderately okay but the risks in the region outweigh its offering investment wise. Another reason why I think this pair could offer a substantial sell opportunity is positive US non-farm payrolls report, what we want to do is ride the sentiment as it becomes clearer.
Not forgetting, that even at dollar worse moments last week, the Euro-single currency has failed to gain enough against the US dollar to cross the ascending channel started in November to confirm a bullish continuation. So this week, I remain bearish on the EURUSD with 1.0821 as the target, provided 1.1233 resistance holds.
Last week I mentioned the USDCAD and the possibility of what it holds, this week I remain bullish on this pair after breaking 1.3142 resistance amid dwindling Canadian employment rate. The double bottom formed by the last two candlesticks last week aligned with the higher-lows trend line, a technical break above 1.3142 will confirm our bullish continuation. As long as price remains above 1.3142, I am bullish on USDCAD with a 1.3387 target.
Last week, I explained the viability of the USDCHF following the decision of the Swiss National Bank (SNB) to intervene in the forex market. Since my last analysis the USDCHF has gained 89 pips to close at 0.9809.
This week, I remain bullish on USDCHF because the new found strength of the US labor market will likely continue to pressure this pair as investors struggle to decipher the situation with SNB, I believe a sustained break of 0.9843 resistance will open 1.0000 parity level, then our target 2 at 1.0093.
To read AUDUSD analysis click here
The GBPJPY lost 199 pips to close at 132.93 on Friday — below the long established downward trend line and short of our 129.86 target. This week I am bearish on GBPJPY with 129.86 as the target.
This pair lost 139 pips before the US dollar gained back part of its losses to the Japanese yen to closed at 101.77, this week I am standing aside on this pair.
For update on AUDUSD pair click here.
Naira Declines to N465 Against US Dollar on Black Market
Naira Falls to N465 Against US Dollar on Black Market
Nigeria’s economic uncertainties continued to weigh on the Nigerian Naira despite the Central Bank of Nigeria’s forex sale resumption.
The local currency declined by N3 from N462 a US dollar to N465 on the black market even with over $58 million injected into the forex market through the bureau de change.
Against the British Pound, Naira depreciated by N5 from N595 to N600 on Friday while it dipped by N3 against the European common currency to N548, down from N545 it traded on Thursday.
A series of weak economic fundamentals and anti-people policy continued to hurt the nation’s economic outlook and investors’ confidence.
In a recent event, the Nigerian government simultaneously raised electricity tariffs, pump prices and foreign exchange rates in an economy that depends on imports for most of its supplies.
Also, with the unemployment rate at over 27 percent, inflation rate over 13 percent and the number of companies shutting downing operation rising on a daily bases, foreign investors and even local investors are now holding back on investments needed to support the nation’s weak foreign reserves and cushion the negative effect of COVID-19.
While the exchange rates have moderated slightly from COVID-19 peak, it remains close to COVID-19 record.
Zenith Bank Joins Other Banks to Cap International Spend Limit at $100/Month
Zenith Bank Caps International Spend Limit at $100 Per Month
Following persistent forex scarcity impacting the nation, Zenith Bank has joined other deposit money banks capping international spend limits.
In an e-mail to customers, the lender said “Please be informed that the monthly international spend limit for your Zenith Bank Naira Card has been reviewed to US$100 while the use of Zenith Bank Naira cards for international Automated Teller Machine cash withdrawals is still temporarily suspended.’
It added that this review is in response to change in Nigeria’s macroeconomic factors.
The bank, however, advised those with higher international spend requirements than the US$100 stipulated above to visit any Zenith branch and request a foreign currency debit or prepaid card “which are available in US Dollar, Pounds and Euro variants.”
This is coming a few weeks after UBA, GTBank, First Bank and others capped their international spend limits to $100 for similar reasons. However, Zenith’s decision was after the Central Bank of Nigeria commenced forex sale to the Bureau De Change Operators across the country.
Nigeria’s Foreign Exchange Inflows Decline by 43.2% in May
CBN Says Foreign Exchange Inflows Decline to $5.52bn in May
The total foreign exchange inflows into Nigeria in the month of May declined by 43.2 percent, according to the Central Bank of Nigeria’s report.
The report said the COVID-19 pandemic negatively impacted capital inflows during the month as the total foreign exchange inflows dropped to $5.52 billion.
It said “Inflows through the CBN and autonomous sources were negatively impacted.
“On a month-on-month basis, foreign exchange flows into the economy declined to $5.52bn in May 2020.
“The decline in inflow, relative to the level in April 2020, was attributed to the lower receipts from oil sources, which fell sharply by 55.2 per cent because of the continued fragility in global crude oil demand.
“Inflow through autonomous sources, particularly invisible purchases, declined by 7.0 per cent to $3.51bn, relative to the preceding month, while there was a 66.2 per cent fall in inflow through the CBN, which stood at $2.01bn in May 2020.”
However, foreign exchange outflows from the country declined by 23.9 percent to $2.50 billion in the month. Likely because of forex scarcity and the central bank forex rate adjustments that curbed outflows by foreign investors.
A break down of the report showed that outflow through the apex bank declined by 30.9 percent to $2.19 billion, below what was recorded in April.
But outflow through autonomous sources, mainly imports and Invisibles, rose by 152.2 percent to $0.32 billion. Higher than the amount reported for the month of April.
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