Despite President Trump’s speech last night, we have seen the USD marginally stronger this morning, as US bonds somewhat weakened. Fed officials reiterated their hawkish stance last night, and there is now an 80% probability of a rate hike in March.
In terms of economic data, Tuesday revealed mixed results. US Q4 GDP was revised down to 1.9% from 2.1% but consumer confidence beat expectations and hit the best levels in over 15 years.
News out of the Eurozone this week points to increased uncertainty for the group once again putting it somewhat in the spotlight. An index called the ‘euro break-up’ index showed that out of 1000 investors, a greater number believe that the Euro will break up within the next 12 months with the index rising from 21.3% in January to 25.2% in February.
Meanwhile, in the Netherlands the Geert Wilders-led Party is set to change things up with a likely win on 15 March 2017 in their election. The Party, PVV, is largely in favour of anti-immigration, anti-Islam and they are Euro sceptic which may lead to a Dutch EU referendum dubbed ‘Nexit’.
UK Feb manufacturing PMI fell short of expectations this morning, as the figures arrived at a dismal 54.6 points in Feb, as compared to a previous reading of 55.7 and a market expectation of 55.6.
Another factor to the GBP decline comes on the back of a possible call for another Scottish independence referendum, as Theresa May is preparing for a possible request by the Scottish government to hold an independence referendum as early as March.
The Australian Dollar was the best performing G10 currency on the early hours of March 1 following the release of very positive GDP data. GDP growth rate YoY came in at 2.4%, beating the expectation of 1.9%.
Despite this, analysts expect the RBA to keep rates on hold in the near term as inflation levels are expected to remain low.
According to Jane Foley, a senior FX Strategist at Rabobank, the Swiss franc is overvalued even after taking into consideration the high trade surplus in January. However, this is could be owed to the CHF being considered a safe and stable currency with Switzerland having high levels of employment and a high current account surplus.
Furthermore, data released yesterday by the KOF Swiss Economic Institute revealed a growth in the economy during February which was much greater than expected reporting the KOF Index to have jumped to 107.2 points compared to its expected 102.0.
The economy contracted by 1.5% in 2016, a shade lower than our forecast of -1.4%. As expected, the main reason for the first shrinkage in 25 years, is due to the shortage of hard currency – which was in turn due to the lower oil revenues. Oil remains the largest source of export earnings and fiscal revenues for Nigeria, at around 7% of overall GDP. According to OPEC, oil production slipped to 1.5 million bpd in January 2017 — 17% lower YoY.
The Nigerian Naira has hit a 4 month high against the USD on the parallel market on Tuesday, following the Central Bank’s decision to sell USD 80 million to retail customers and another USD 100 million in currency forwards to increase dollar liquidity and Naira support.
South Africa posted a R10.81 Billion trade deficit in January, which was higher than Market expectations, following a revised surplus of R12.41 Billion in December, and a deficit of R19.55 Billion in January 2016.
Support levels for USD/ZAR can be found at 13.00, and resistance levels at 13.10 and again at 13.20.
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