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Forex Weekly Outlook July 4 – 8

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Outlook

Post-Brexit has not only changed the way investors and businesses approach the markets, but also have up the level of uncertainty and wariness of financial market participants. Last week, the US final GDP showed that the economy rose at a 1.1 percent annualized rate in the first quarter, better than 0.8 percent previously estimated. While both consumer confidence index and manufacturing sector showed reasonable improvement, yet the dollar lost substantial ground against its counterparts, partly due to the Federal Reserve’s decision to delay rate hike, and perhaps that explained the level of uncertainty of the financial markets post-Brexit.

Another important factor to consider going forward is the global political system — the US presidential election, the Japanese election, the UK election and the on-going Australia election are key determinants of market direction as investors and businesses are expected to make adjustments to their investments and business decisions to accommodate possible changes in policies peradventure incoming administration deem it fit.

This week, traders are also expected to start pricing in the possibility of Bank of England cutting interest rates further, after the governor of the Bank of England Mark Carney said on Friday that “it is now clear that uncertainty could remain high for a while — the economic outlook has weakened and necessitate some monetary easing over the summer.” Hence, caution is advised. This week the EURUSD, AUDJPY and USDJPY top the list. Lets start;

EURUSD

There is no doubt that the US economy has rebounded from 38,000 non-farm payrolls recorded in May, what is uncertain is to what extent. For instance, the manufacturing sector improved significantly to its highest in a year, while unemployment claims surged 1k last week. But the Euro 19-nation single currency on the other hand is entangled in post-Brexit gloomy outlook with uncertainty hanging over its head, although the US dollar lost part of its gains last week I believed its largely due to a delay in the rate decision and that the Euro currency is presently not attractive enough to topple the US dollar gains just yet.

Outlook

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If the pair failed to remain below 1.2304 resistance level, a sustained break will nullify this analysis as it would have confirmed an important bullish pattern. Otherwise, I am bearish on the EURUSD and expect a break of 1.1090 to open up 1.0714 target. Non-farm payroll report is due on Friday.

AUDJPY

The Aussie dollar attracted substantial buyers last week to gain back part of its losses against the Japanese yen. While the outlook seems okay without factoring in China’s weak manufacturing report released on Friday and chaotic electoral process that left the country without a conclusive election result last week, the pair remains bearish as long as 78.14 resistance level holds. Especially knowing the potential of the Japanese yen as a safe haven asset in an eventful period like this, I remain bearish on AUDJPY with 73.544 as the target.

Outlook

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Again Japan’s manufacturing sector, consumer confidence and trade balance improved well enough to reinforce the sort of demand needed to weigh on the pair, since weak China’s manufacturing sector will reflect on Aussie dollar this July anyways.  It is widely expected that the Reserve Bank of Australia will leave its rate unchanged on Tuesday.

USDJPY

As long as global risks remain high, global investors will continue to sell-off this pair to contain risk exposure. Even with 2 percent inflation target gradually becoming elusive, Japanese yen remains attractive.

USDJPYDaily

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This pair remains on the downside as long as 104.25 resistance level holds.

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.

Forex

US Dollar to Naira Bank Rate Today – See Investorsking Daily Currency calculator

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Naira Dollar Exchange Rate

US Dollar to Naira Bank Rate Today and Details of Macro Fundamental Challenges Hurting the Naira

US dollar to naira bank rate today remained largely unchanged at around N386 to a US dollar. However, currency traders can check the daily US dollars to the Naira exchange rate using our currency calculator.

On the black market, US Dollar to Naira exchange rate stood at N468 on Wednesday morning, a decline of N1 from the N467 it traded on Tuesday. Suggesting that economic uncertainties continue to dictate Naira value despite central bank efforts at supporting the local currency.

The apex bank had lowered the monetary policy rate to stimulate growth and broaden economic productivity just a few weeks after resuming forex sales to the bureau de change operators across the nation.

Also, the federal government announced a survival fund to support micro small and medium businesses impacted by COVID-19. All these are yet to reflect on the economy or the naira value as weak sentiment regarding project recession in the third quarter continued to outweigh any positivity.

While interest rate reduction had bolstered the attractiveness of the Nigerian Stock Exchange in the last one week, it is yet to reflect on Naira value as forex scarcity has impeded manufacturers and other import dependent businesses from access the US dollar for their raw materials.

Even with the US Dollar to Naira bank rate trading better when compared to the black market rate, it is generally inaccessible as banks have capped the foreign spending limit to $100 per month, meaning small import businesses that depend on Dollar to Naira bank rate to operate will struggle henceforth.

These numerous macro fundamentals issues amid a 27.1 percent unemployment rate and over 13 percent inflation are affecting investors’ confidence in Africa’s largest economy.

The central bank US Dollar to Naira exchange rate remained N379 but available at N380 to banks that also added operating cost and spread to between N383 and N386 depending on the bank you are dealing with.

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Bureau De Change Operators Begs CBN to Approve Electronic Forex Trading

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BDCs Seek  CBN Approval Electronic Forex Trading

Bureau de change operators (BDCs) on Wednesday begged the Central Bank of Nigeria to approve the usage of electronic foreign exchange trading to ease demand pressure and facilitate comfort.

Alhaji Aminu Gwadabe, the President of Bureaux De Change Operators of Nigeria (ABCON), made the appeal during a webinar organised by its member with the theme ‘The Impact and Roles of BDCs Challenges and Way Forward.’

Gwadabe urged bureau de change operators to adhere to the rules guiding forex transactions by selling at an appropriate rate stipulated by the CBN.

Gwadabe said: “Technology is a threat whether we like it or not and we have been urging the CBN to allow us operate within the payment space. Our request to the CBN and the federal government is to continue to empower us more especially in the payment space.

“The world is now in the fourth generation and it is no more in the traditional method of doing business even agriculture is digital, so we are appealing to the CBN to allow us be on the digital payment space. As this will deepen the economy, further converge the rate, further deepen liquidity and empower the BDC.

Continuing, Gwadabe said: “Some of us want to be ungodly and trading on parallel market rate is highly unacceptable. The CBN has said it is highly unacceptable, ABCON has said it is highly unacceptable and so we are calling on all the directors of BDCs to please ensure that you don’t sell to willing customers. Any willing customer that says he wants to buy at N465 is not your customer and they would land you sanctions and get penalties.

He added that monies found on operators carrying out illegal trades would be seized by the relevant authorities.

He said: “Any dollar you found trading on the street is going to confiscated and would become federal government’s property. Any dollar you try to courier via border movement at the airport is also government property.”

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Naira to Dollar Exchange Rate in 2020

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Naira to dollar exchange rate in 2020 declined by N73 from N306 Central Bank of Nigeria sold it in the beginning of the year to N379 and N386 on the investors and exporters forex window.

The Naira to dollar exchange rate in 2020 has been marred by a series of economic uncertainties and weak macro fundamentals caused by the COVID-19 pandemic.

At the beginning of the year, the official Central Bank of Nigeria’s naira to dollar exchange rate stood at N306 to a US dollar, while on the parallel market popularly known as the black market, the local currency was exchanged between N350 to N360 per US dollar.

On the investors and exporters’ foreign exchange window instituted by the central bank to mirror a free market, the naira was exchanged at N325 to a United State dollar.

However, unclear economic direction amid a 50 percent increase in Value Added Tax from 5 percent to 7.5 percent and border closure hurt the Nigerian economic outlook and plunged investors’ confidence in the economy even before COVID-19 outbreak.

This weak sentiment metamorphosed into broader economic decline when COVID-19 broke out in the country on February 27 2020 as investors that were doubting President Buhari economic path see no reason to wait any longer or believe Nigeria has what it takes, in terms of the health system, to contain an impending health catastrophe.

The surged in demand for US dollar by those looking to move their funds out of the country compelled Governor Godwin Emefiele led central bank to adjust the Nigerian Naira foreign exchange rate from N306 to a US dollar to N360 in order to discourage capital flight while simultaneously sustain dwindling foreign reserves.

But with global oil prices plunging to as low as $15 per barrel, below Nigeria’s $17 per barrel cost of production and demand for the commodity, especially Nigeria’s crude oil at almost zero during the peak of COVID-19, foreign investors were willing to lose N54 per US dollar to exit the Nigerian market.

According to a JPMorgan report, central bank forex backlog was over $5 billion, yet foreign reserves continues to drop. Left with little to no choice, the federal government approached the International Monetary Fund (IMF) for $3.4 billion financial assistance while the apex bank devalued the Naira again to the currency $379 to a US dollar and N386 on the investors and exporters window.

Despite the negative impacts of COVID-19 on the Nigerian people and the broad-based decline in economic activities that saw the nation’s Gross Domestic Product (GDP) contracting by 6.10 percent in the second quarter of the year and the unemployment rising as high as 27.1 percent or 21.8 million people in an import-dependent economy, the apex bank did not just devalue the Naira twice, the Federal Government raised electricity tariffs and remove subsidy in an economy with very weak consumer spending.

With the series of economic uncertainties, investors in forex forward market in London started offering Naira future contracts for N545, saying the apex bank no longer have the resource to support the Naira given the current global situation.

True to their words, Naira to Dollar exchange rate in 2020 plunged to N480 on the black market amid persistent forex scarcity before recently moderating to N467 when the central bank resumed forex sales to the bureau de change operators across the country.

Also, with the economy expected to plunge into an economic recession for the second time in four years in the third quarter of 2020, the Naira to Dollar exchange rate is expected to suffer even further in 2020.

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