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FXTM: Trump U-Turns Dollar Weakness Fails to Support Rand, Lira

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FXTM Vice President of Market Research, Jameel Ahmad comments on the US President Donald Trump’s latest comments and escalating geopolitical risks.

The recent escalation of geopolitical risks dominating the financial market headlines has been briefly removed from investors’ radars after US President Donald Trump once again took the markets by surprise.

This time, President Trump made U-turns on several of his previous public views, making investors wonder whether he could be gradually abandoning some of his core election pledges. While it is not a surprise at all to hear the US President make downbeat comments over the Dollar, backing away from labelling China as a currency manipulator and seemingly supporting the need for lower US interest rates is a real surprise.

Trump reversing away from a previously well-documented aggressive stance on China will go a long way to improving his image in mainland China; it will also be seen by many other observers as an attempt towards improving diplomatic ties, following Chinese President Xi Jinping’s recent visit to the United States.

Away from diplomacy, this shift in tone should be viewed as a positive development for the financial markets, as it reduces the risk of China abandoning its US Treasury Holdings as a result of the previous risk of President Trump beginning a trade war with China.

Most emerging market currencies across Asia have welcomed the latest comments from the US President, with the majority of currencies across the Asian Pacific moving somewhat higher against the Dollar.

Emerging market currencies that are particularly sensitive to speculation around US interest rate rises, such as in Malaysia, Indonesia and perhaps the Indian Rupee, will also applaud comments around the need for lower US interest rates.

It has been noted that the Bond markets have benefitted from Trump’s unexpected comment that he “likes” the Federal Reserve’s low-interest rate policy.

However, the potential for further gains in the Asian emerging market currency space will be attributed to expectations of the Fed pulling the trigger on an interest rate rise once again in June drifting lower and also whether Trump next chooses to take a softer stance on protectionist policies.

While emerging market currencies across Asia have benefitted from Trump’s comments, it has not helped to find a bid for either the South African Rand or Turkish Lira. Both currencies are plagued by political risk, with the upcoming referendum in Turkey this weekend giving possible cause for a major event risk over the Easter weekend.

The Turkish Lira and South African Rand are obviously not correlated in any way, but with both currencies being plagued by political issues, this is impacting investor confidence and weakening economics that includes impending inflation risks.

Inflation risks are going to be a major headline attraction for the Rand over the next couple of months, following the currency being squashed to pieces in recent weeks.

Gold eyes $1300
The 2017 revival in the value of Gold is showing no signs of slipping, after the precious metal climbed to fresh levels not seen since the US Election, getting marginally close to $1290 earlier in trading on Thursday.

These are still uncertain times in the financial markets and some would even add global politics, meaning investors are keeping Gold as a close ally when it comes to hedging.

The combination of uncertainty when it comes to political risks, the upcoming elections in France, rising geopolitical tensions and doubts over Trump’s ability to follow through with his campaign promises presents an ongoing threat to investors entering a period of “risk-off” that is too difficult to ignore when it comes to being encouraged towards Gold.

Sterling Backs Away from Attempt for 1.26
After benefiting from the unwinding of USD positions, it appears that the GBPUSD is at threat of shying away from an attempt to reach 1.26 before the markets close for the Easter holidays. If you ask me, the ongoing uncertainty over Brexit’s direction is still enough motivation to maintain a negative mindset towards the Pound.

Investors are likely to continue utilising sell-on rally opportunities in the Cable, when the pair climbs near 1.25 with this being the mindset traders have exploited for months.

 

 


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E-Financial

Lagos State Appoints MoneyMaster as Payment Partner for “Ounje Eko” Programme

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“Ounje Eko”, the food price discount initiative of the Lagos State Government, has appointed leading payment service bank, MoneyMaster Payment Service Bank Limited (MMPSB), as its collaborator in the bid to ensure ease of payments at the market.

MoneyMaster is one of the Central Bank of Nigeria-licensed Payment Service Banks (PSBs) to promote financial inclusion across Nigeria.

Under the partnership, MMPSB will apply its cutting-edge payment solution to engender easy payment and reconciliation in order to make   the experiences of Lagosians who will be getting their food supplies from the markets pleasurable. Its payment solution is also all-encompassing and ensures real time value to payment destinations.

The mobile bank was appointed as the collection and payment partner for “Ounje Eko” Food Markets programme which is a government initiative serving the five divisions of Lagos State. Consequent on this, MoneyMaster Payment Service Bank will collect payments in 57 LCDAs in the state.

The partnership gives credence to the quality of payment solutions that MoneyMaster is reputed for in its services to its growing business clientele in private and public sectors.

 


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E-Financial

CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering

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Central Bank of Nigeria (CBN), is investigating irregular foreign exchange transactions and forward contracts valued at approximately $2.4 billion.

CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering

The  inquiry follows an extensive audit by Deloitte, which scrutinized $7 billion in dollar debts accumulated under the bank’s previous leadership.

In the aftermath of the 294th Monetary Policy Committee meeting in Abuja, Yemi Cardoso, governor of CBN,  disclosed to journalists that the investigation, supported by the Economic and Financial Crimes Commission, among other security bodies, aims to clarify the legitimacy of these FX allocations identified as problematic by the audit.

“It was determined that a number of these transactions did not qualify…they were outright illegal. The law enforcement agencies are now looking into those transactions that as far as we are concerned, are not valid to be paid,” Cardoso detailed, emphasizing the unlawful nature of these forex deals.

The crux of the investigation lies in the audit findings that a significant portion of the scrutinized transactions lacked proper documentation and, in many instances, were deemed outright illegal.

However, the unfolding investigation has raised concerns within the organized private sector, with some entities contemplating legal action against commercial banks for unresolved forex bids.

Despite these tensions, Governor Cardoso reassures that the foreign exchange market remains open and transparent, inviting stakeholders to address their forex needs through the official channels.

Furthermore, Cardoso clarified the distribution of fertilizers to farmers as a one-off measure and not indicative of a shift back to direct interventions by the CBN, underscoring a commitment to strategic, regulatory governance rather than direct market involvement.

 

 

 

 

 

 

 

 


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CBN Urges Banks to Expedite Action on Recapitalisation

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Central Bank of Nigeria (CBN) has directed deposit money banks in the country to expedite action to increase their capital base from the current ₦25bn.

CBN Urges Banks to Expedite Action on Recapitalisation

Olayemi Cardoso, governor of CBN

Olayemi Cardoso, governor of CBN, stated this during the apex bank’s 294th meeting of the Monetary Policy Committee (MPC) on Tuesday in Abuja, when the MPC hiked the interest rate by 22.75% to 24.75%.

The apex bank chief said the MPC examined developments in the banking sector and expressed satisfaction that the industry remained stable. The committee, however, said to guard against risk, commercial banks in the country should accelerate their recapitalisation efforts.

Cardoso said, “The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable. The committee thus called on the bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macro-potential guidelines.

“The MPC also enjoined the banks to expedite actions on the recapitalisation of banks to strengthen the system against potential risks in an increasingly globalised world.”

 

 

 

 


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