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Forex: Overview on the 2017 Key Market Themes

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Hussein Sayed, chief market strategist at FXTM

Hussein Sayed, chief market strategist at FXTM provides an overview on the 2017 key market themes. Whether you consider 2016 a good or a bad year, it was by no doubt the year of surprises. Not just because Donald Trump was elected the 45th president of the United Stated or because the UK decided to leave the EU, but the markets’ reactions to these events were even more surprising and most forecasters got it wrong.

A new year has started and many questions remain to be answered; here are some of the most asked questions for 2017: Will the Trump rally carry on? How many rate hikes will the Fed deliver? What is the future of the UK and the EU? Will OPEC finally balance the oil markets?

Will The Trump Rally Carry On?
Following the election of Donald Trump on November 8, all U.S. major indices recorded new highs.

The Dow Jones industrial average rose 8%, S&P 500 and Nasdaq composite gained 5%, and the small-cap stock market index Russell 2000 outperformed its peers rising by more than 13%.

From a market valuation perspective, very few may disagree that stocks are expensive, but the expected combination of fiscal stimulus and deregulation for some sectors under Trump’s presidency were the main catalysts for the rally. Of course, financial markets tend to price in events before they occur, but this time I believe investors have priced in most of the good news, and it requires very strong corporate profit growth to keep this bull market alive.

Predicting the end of the bull market is a tough call, but the downside risk in 2017 is likely to be larger than the upside potential. If U.S. policy makers succeed in delivering the anticipated growth we can see another 5 – 10% gains in U.S. stocks, but failure to do so will cause a steep selloff that could exceed 20%.

Day traders may be luckier than investors in 2017 as a new indicator has been added to their watch list: Trump’s twitter account.

On December 6, Trump tweeted “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!”, few seconds later Boeing stock wiped almost $1 billion from its market cap. We expect to see more of these tweets in 2017 and algorithms will probably require long time to put them into play, leaving retail traders with opportunities to profit from such market disruptions.

How Many Rate Hikes Will the Fed Deliver?
2016 kicked off with the expectation that four rate hikes would occur, but only one was delivered in December.

Although it was anticipated that the Federal Reserve will be more cautious in their forward guidance for 2017, December’s meeting took many economists by surprise as they hinted for three rate hikes.

Since the financial crisis in 2008 the Fed has got many things wrong, whether it is forecasting rate hikes, economic growth and inflation levels, and now with a new administration to take office on January 20, this could make the Fed’s projections even more complicated.

Inflation has always been the main justification for low interest rates, but now, even before Trump takes office, a couple of inflation gauges are running above 2%. The Fed did not account for any fiscal stimulus measures in their most recent projections, suggesting that huge shifts in expectations may be seen.

The rising U.S. dollar which is currently at a 14-year high is another source of worry for the Fed, and tightening too fast will lead to even stronger dollar hitting U.S. exports and multinational companies’ profits.

If Trump’s measures were passed and economic growth picked up, the Fed will have few options, either tightening monetary policy more aggressively, or to fall behind the curve and let the fixed income market lead the way, but three rate hikes in 2017 is my base case. Either way the dollar is likely to remain strong as divergence in monetary policies will continue to widen.

Future of the UK and the EU?
Hard, Soft or Grey Brexit. This was the most argued topic in the past six months, and until now there’s no clear path on what direction the UK will move.

The pound ended 2016 17.5% lower against the US dollar since June 23 and there’s lot of speculation on how it will end in 2017. Of course, much will depend on the path Britain will choose.

Theresa May promised to trigger Article 50 by the end of March, but we still need to hear from the Supreme Court on whether the UK government needs parliamentary approval before starting the withdrawal from the EU.

The delay in triggering Article 50 will be positive in the short term for sterling, and negotiations may last well beyond 2017 on the terms of Brexit.

Meanwhile investors will be focusing on the economic developments and the direction of the Bank of England’s monetary policy, which will probably be the second major central bank to raise rates after the Fed.

Politics within the EU will rule investment decisions in 2017. Germany and France, the two largest economies will hold elections amid the rise of Eurosceptic candidates.

Italy is likely to see an early vote, after the resignation of Matteo Renzi last month, and the Five Star Movement has vowed that if it wins power it will hold a referendum on whether Italy should leave the Eurozone.

Although many polls indicate that far right candidates are still behind, nothing should be taken for granted after Trump won the U.S. presidency and Britain voted to leave the EU. Expect to see more pressure on the Euro and look out for parity against the dollar in the first six months. 

Will OPEC finally balance the oil market?
After hitting a low of $27 a barrel in February 2016, Brent prices more than doubled by the end of year and many investment banks still see further increase in prices for 2017.

OPEC’s decision to cut its output by 1.2 million barrels a day starting January, and non-OPEC producers to cut 558K barrels for the next six months to drain record global oil inventories led Brent prices to post its first yearly increase since 2012.

Whether more appreciation is to be seen in 2017 will depend on multiple factors, and the biggest one currently looming is compliance to production cuts. It’s in no one’s interest not to comply, but historic figures show that delivering on previous production cuts has been poor.

U.S. producers are another element to be focused on, how fast shale may come back is a key component to be considered in the price equation.

Although Trump has made the energy sector part of his economic growth plan, I believe it won’t have a lot of impact if prices don’t hold up. The dollar strength will likely impact the demand side, as continued strength will make oil more expensive in other currencies.

With all these unknows we will likely see prices moving in tight ranges in the first quarter until we get a clearer picture.

 

Nigeria CommunicationsWeek believes that technology makes life more exciting and helps improve the lives of people around Nigeria and indeed the world. So since 2007, we have devoted our energy to independent reportage of technology and how they affect lives.

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E-Financial

Court Asks FG to Take over Bank Accounts without BVN

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Bank account owners who are yet to have a Bank Verification Number (BVN) run the risk of forfeiting their money to the federal government within the next two weeks unless they can justify their ownership of such accounts.

A Federal High Court in Abuja has granted a temporary forfeiture order on such accounts.

It also restrained commercial banks from operating such accounts for the meantime and directed them to disclose the owners of the accounts and the status of the funds in them.

Justice Nnamdi Dimgba handed down the order on October 17 while ruling on an ex-parte motion filed by the Federal Government and the Attorney General of the Federation (AGF).

The ex-parte motion – FHC/ABJ/CS/911/2017- was filed on September 28 this year and argued by the plaintiffs’ lawyer, A. D. Tyoden.

It was brought pursuant to the Central Bank of Nigeria’s Know Your Customers Guidelines and Section 3 of the Money Laundering (Prohibition) Act of 2011 as amended.

The enrolled orders from the ruling reads: “That the 1st – 19th defendant banks shall disclose: (a) the names of the accounts as operated; (b) account number(s); (c) outstanding balances (d) domiciliary accounts and (e) the branch/location where the accounts are domiciled of all accounts without BVN.

“That the 1st – 19th defendant banks to disclose any investments made with funds from these accounts without BVN in any products including fixed/term deposits and their liquidation and interest incurred, bank acceptances, commercial Papers and any other relevant information related to the transaction made on the accounts.

“That an order is hereby made freezing the said accounts by stopping all outward payments, operations or transactions (including any bill of exchange) in respect of the accounts pending the hearing and determination of the substantive application.

“That an order is hereby made directing the 1st to 19th defendant banks to disclose any investments made with funds from these accounts without BVN in any products including fixed/term deposits and their liquidation and interest incurred, bank acceptances, commercial papers and any other relevant information related to the transaction made on the accounts.

“That an interim order is hereby made directing the Central Bank of Nigeria and the Nigeria Interbank Settlement Systems to validate the information contained in the affidavit of compliance/disclosure filed by the respective 19 banks within seven days from the date of service on the Central Bank and NIBSS.

“That an interim order is hereby made appointing a Bank Examiner from the Central Bank of Nigeria to examine the books of any bank that fails to comply with the order of the honourable court to file affidavit of disclosure.

“That an interim order is hereby made granting leave to the applicants or any officer authorised by them to advertise the accounts without BVN disclosed by the bank in a widely circulated national newspaper as notice to any person or body corporate or financial institution who may have any interest in any of the said accounts to claim ownership of same within 14 days of the publication of the order and show cause why the proceeds in the account should not be permanently forfeited to the Federal Government of Nigeria.”

Further hearing in the case was fixed for November 16.

At the last count, the Central Bank (CBN) had issued 30,511,506 BVNs.

The Nigeria Inter-Bank Settlement System (NIBSS) says a total of 45.85 million bank accounts remain unlinked although when compared with the active accounts the number stood at 15.72 million unlinked to BVN as at February 2017.

Even before the court order the CBN had issued a memo warning the banks and NIBSS, Deposit Money Banks (DMBs) and Other Financial Institutions (OFIs) to ensure proper capturing of the BVN data and validate same before linkage with customers’ accounts; ensure all operated accounts are linked with the signatories’ BVN; and ensure customer’s names on the BVN database are the same in all of his/her accounts, across the banking industry.

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UBA Introduces Video Live Chat with Co-Browsing Technology

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In recent times, customer behaviour and expectations are ever-evolving and with this challenge, comes the need to meet their needs as well as ensure, new offerings are at the forefront of technological evolution.

 

On the back of this development, UBA a leading innovative player in Financial Services is finding new ways to communicate and engage with their customers.

 

With the growing mobile consciousness, customer demand for online services is on the rise and it is imperative to meet this demand with digital self-service platforms.

 

However, to meet this demand, the role of human interaction in the process cannot be underestimated.

 

It fits into our creed to continue to foster our unlimited dedication and access to the customers.

 

In this regard, the United Bank of Africa, in its unrelenting effort to raise the bar, likewise the levels of ease and convenience in customer experience through innovation, has introduced Video live chat with Co-browsing technology.

 

Firstly it enables Customer Experience Experts to help customers in real-time, enabling a support experience centred on visual engagement.

 

Why is this important? 65% of the world are visual learners. Not only can enquiries and issues be resolved more efficiently and swiftly, but co-browsing can complement other channels, improving the overall customer experience

 

UBA is differentiating with Customer Experience and use of Video Live Chat and Co-browsing to improve customer acquisition, service and to improve x-sell & retention by enabling more meaningful contact with customers.

 

Video Co-browsing enables customers to virtually have a one-on-one interface with the bank through co-browsing application via video live chat, text chat, and through real time document exchange. This makes it easier for bank staff to assist customers through a number of difficulties; from filling intricate bank forms and even helping them resolve much more complex transactions. Sometimes, the platform simply facilitates directing the customers to the exact information they need.

 

It provides a secure file-sharing, compliant, real-time communication solutions that enables the bank hold co-browsing sessions to expedite troubleshooting as well as ordinary enquiries.

 

This without a doubt moves light years ahead of the old customer service where interaction is purely through phone calls; this method which has proven to be frustrating especially when it involves fixing a problem urgently.

 

It also comes resourcefully as a quick and easy fix for those who do not have enough time for a physical visit to the bank to take care of their transactions.

 

Other benefits include:

o       All session actions are accountable

o       Secure collaboration

o       Navigate the web together

o       Control access

o       Collaborate online, effectively

 

With this latest innovation, UBA can engage visually and digitally with customers while maintaining human interaction at any given time, in a bid to continue to virtualize customer experience.

 

It offers faster solutions in response to customer enquiries on a more personalised basis anywhere, anytime and from any device.

 

UBA as always, is committed to ensuring greater efficiency and better customer satisfaction. To experience the Video Love chat and Co-browsing technology, visit ubagroup.com .

 

 

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E-Financial

BVN: CBN Orders Banks to Keep Database of Fraudulent Customers

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Godwin Emefiele, Governor of the Central Bank of Nigeria

The Central Bank of Nigeria (CBN) yesterday directed banks to establish a database of their customers identified through their Bank Verification Numbers (BVNs) to be involved in a confirmed fraudulent activity in the banking industry.

The directive was contained in the Regulatory Framework for Bank Verification Number (BVN) Operation and Watch-list for Nigerian Financial System released by the CBN. The implementation of the framework is with immediate effect.

’Dipo Fatokun, CBN Director, Banking & Payments System, who signed the framework, said bank customers are to by this framework, abide by  the regulatory framework for BVN operations and the watch-list for the Nigerian Banking Industry and also report all suspicious or unauthorized activities on their accounts.

Data from the CBN showed that Nigeria experienced a total of 3,500 cyber-attacks with 70 percent success rate and loss of $450 million within the last one year mainly through cross-channel fraud, data theft, email spooling, phishing, shoulder surfing and underground websites.

Although e-fraud rate in terms of value dropped by 63 percent, after the BVN introduction and improved collaboration among banks via the fraud desks, the total fraud volume rose significantly by 683 percent.

The new regulation is expected to assist the CBN to a great deal, in curbing the menace of fraudsters

According to Fatokun, the new framework is in the exercise of the powers conferred on the CBN, by Sections 2 (d) and 47 (2), of the CBN Act, 2007, to promote the development of efficient and effective payments systems for the settlement of transactions.

He said the framework provides standards for the BVN operations and watch-list for the Nigerian Banking Industry. The watch-list comprises a database of bank customers’ identified by their BVNs, who have been involved in a confirmed fraudulent activity in the banking industry in Nigeria.

Fatokun said the regulatory framework shall guide activities of the participants in the provision of the BVN operations in Nigeria and that the CBN, Nigeria Inter-Bank Settlement System (NIBSS), Deposit Money Banks (DMBs), Other Financial Institutions (OFIs) and Bank Customers are participants in its implementation.

He said the CBN, in collaboration with the Bankers Committee, proactively embarked upon the deployment of a centralized BVN System and launched the BVN in February 2014. This, he said, was part of the overall strategy of ensuring the effectiveness of the Know Your Customer (KYC) principles, and the promotion of a safe, reliable and efficient payments system.

The BVN gives a unique identity across the banking industry to each customer of Nigerian banks.

“This framework also defines the establishment and operations of a Watch-list for the Nigerian Banking Industry, to address the increasing incidences, of frauds, with a view to engendering public confidence in the banking industry.

“This framework, without prejudice to existing laws, is a guide for the operations of the watch-List in the Financial System.”

The Watch-list is a database of bank customers identified by their BVNs, who have been involved in confirmed fraudulent activities.

The framework is expected to clearly define the roles and responsibilities of stakeholders; clearly, define the operations of the BVN in Nigeria; define access, usage and management of the BVN information, requirements and conditions and provide a database of watch-listed individuals.

It is also expected to outline the process and operations of the watch-List and deter fraud incidences in the Nigerian Banking Industry.

In implementing this framework, the CBN is expected to approve the Regulatory Framework and Standard Operating Guidelines as well as approve eligible users for access to the BVN information.

The Nigeria Interbank-Settlement System (NIBSS) is to collaborate with other stakeholders to develop and review the Standard Operating Guidelines of the BVN while the banks are to ensure proper capturing of the BVN data and validate same before the linkage with customers’ accounts.

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