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FXTM Analysis: The Dollar Sinks while Euro Remains Supported

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Lukman Otunuga, a research analyst at FXTM.

FXTM Research Analyst Lukman Otunuga comments on the IMF’s US growth forecast and the Euro.

The last remnants of the once phenomenal Trump rally were thoroughly crushed on Tuesday after the International Monetary Fund (IMF) trimmed its growth forecast for the US economy amid uncertainty over White House policies.

Although US President Donald Trump has, on multiple occasions, stated that he will “make America great again” the IMF seems unconvinced as it cut growth forecast for the US economy to 2.1% in 2017 and 2018, against April’s projections of 2.3% in 2017 and 2.5% in 2018.

With the world’s largest economy struggling to hit Trump’s 3% GDP target as it confronts issues ranging from an ageing population to low productivity, sentiment is likely to take a hit with the Dollar finding itself under renewed selling pressure.

Bearing in mind that the IMF’s growth projection for the US economy was revised due to flailing assumptions of Donald Trump moving forward with market shaking pro-growth policies, this is a big deal and it will be interesting to see how Fed policymakers react.

Dollar bullish investors who were in desperate need of inspiration to support the Greenback were left empty handed on Tuesday evening after Yellen maintained a safe distance from monetary policy at an event in London. Although she reiterated that “it will be appropriate to raise interest rates very gradually,” this was old news with nothing fresh brought to the table.

An interesting statement on Yellen’s part was how the banking reforms have currently made the financial system safe, with the next type of crisis that rattled the global markets in 2008 “hopefully not in our lifetimes.” While the comment continues to echo her overall optimism over the US and global economy, Dollar bears were unfazed with the Dollar Index sinking towards 96.20 as of writing.

GBPUSD pops above 1.2775
Sterling bulls were gifted an unexpected lifeline on Tuesday in the form of Nicola Surgeon putting the Scottish independence referendum bill on hold. With the delay of the proposed referendum reducing some political risk at home, the Pound was given room breath.
A weak Dollar played a role in the GBPUSD’s rebound as prices sprung towards 1.2850. While short-term technical bulls may have won the battle this week, the war still rages on with Brexit woes likely to limit gains in the medium to longer term.

Draghi inspires Euro bulls
Euro bulls were unstoppable during Tuesday’s trading session following the firmly hawkish comments from European Central Bank President Mario Draghi which boosted confidence over the health of the European Economy. With “deflationary forces being replaced by reflationary ones,” speculation has mounted over the central bank potentially tapering QE in the future.
Although the central bank president still highlighted that the inflation dynamics remain muted, there is optimism that the current factors hindering inflation are transitory and as such the Euro found further support.
A vulnerable US Dollar complimented the EURUSD’s upside with prices bursting above 1.1300. Technical traders could exploit the decisive break above 1.1300 to target 1.1450.

WTI Crude edges above $44
The fundamental reason why oil has remained depressed for such a prolonged period lies in the high global crude inventories. As long as the oversupply woes remain a dominant theme, the bearish sentiment towards oil should ensure sellers maintain control.
Although WTI Crude edged higher during Wednesday’s trading session, this technical bounce may provide a platform for bears to install renewed rounds of selling.
This remains a critical period for the oil markets especially when factoring in how the extended periods of low prices and US Shales resurgence could cause OPEC’s output cut deal to fall apart. A technical bounce on oil may be on the cards with traders observing how prices react to the daily 20 SMA which is coincidentally at $45.

Commodity spotlight – Gold
Gold bulls were unrestrained during Wednesday’s trading session with prices clipping $1252 as the combination of Dollar weakness and risk aversion boosted the metal’s safe-haven allure. The sharp losses observed at the start of the week have almost been clawed back with bulls eyeing $1260.
With the ongoing uncertainty of Brexit, political risk in Washington and jitters from depressed oil accelerating the flight to safety, Gold is likely to remain supported moving forward. Technical traders will be paying attention to how the metal behaves above $1250. A daily close above $1250 could encourage a further incline towards $1260.

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E-Financial

Vodacom Director Urges Accountants to Leverage Sage/ACCA Partnership

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By peter oluka

Mr Oluseyi Olanrewaju, the finance director at Vodacom Business Africa (Nigeria) Limited, has re-emphasised the need for accounting professionals to embrace digital culture.

He made the remark while delivering keynote address at Sage-ACCA Continuing Professional Development (CPA), event held in Lagos Tuesday, which was the launch of partnership between the two entities to provide platform for accountants to embrace digital transformations.

Olanrewaju emphasized that rapid growth and development in information technology has brought about digital revolution in economic, social and cultural fields, and bequeaths today’s accountant with the responsibility to improve on the skills to remain relevant.

With the recognition of the accounting discipline as an information system, he said, the accountants can’t undermine the influence that the changes in processes of carrying out transactions with the usage of IT in business operations.

In a bid to keep up with changing conditions and the enabling inclusion of information era the need to embrace the digital culture in accountancy can’t be overlooked especially in medium to large scale business.

“Technology should not be viewed as a threat rather tools to boost accounting profession. Digitization is the future; as accountants we can’t run from it. Yes, manual processes are ridden with high risks on accounting and costly. Thus, changes is the environment necessitates changes in applicable accounting tools and skills required to carry out accounting roles”, Olanrewaju said.

Determinants of business that qualify as medium to large include: IT staff & skills including several specialists, multiple locations, large capex in relation to other businesses in operation in the same industry and business with main considerations for technology purchases being advanced features and security.

Using the acronym: VUCA- Volatile, Uncertain, Complex and Ambiguous situations, he reminded the participants that, roles of accountants have changed overtime, demanding for real-time ‘results’. “The environment demands you react quickly to ongoing changes that are unpredictable; it requires you to take action. Therefore, there is little you can achieve today in the ‘VUCA’ world without digitization”.

The keynote speaker also applauded Sage X3 offering, such as robust accounting processes; consistency; time saving; delivers visible metrics; helps to improve operational efficiency and assists users to be in line with government regulations and international accounting rules.

Participants at the interactive session with other C-level ACCA members also learnt how Sage X3 offers the bedrock of the adjustments required in today’s accounting field.

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E-Financial

CBN 14% Interest Rate: Investors Still Expecting Cut

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Lukman Otunuga, a research analyst at FXTM.

By peter oluka

Nigeria’s central bank has yet again left benchmark interest rates unchanged at 14% in November amid a ‘fragile’ economic recovery.

But, Lukman Otunuta research analyst ForexTimes, in his comment, believes investors are still keen on interest rate cut.

The apex bank also left the cash reserve ratio (CRR) at 22.5 percent.

CBN governor, Godwin Emefiele made this known on Tuesday while announcing the decision of the committee in Abuja.

Emefiele said only one of the nine members of the committee voted against the decision.

“Inflation in particular requires very close monitoring to gain clarity on the medium-term optimum path of monetary policy,” Emefiele told a news conference.

The monetary Policy Committee had begun its last meeting for the year on Monday.

According to the committee, the interest rate was held to prevent exchange rate pressure.

Commenting on the decision by the apex bank, Otunuga said, “With GDP growth in the third quarter rising by 1.40%, it seems that the central bank is hesitant to take action anytime soon.

“I believe that Nigeria’s improving economic landscape, and signs of inflationary pressures easing, are likely to support investor expectations of a rate cut.

“With inflation in Nigeria at 15.91%, there is a suspicion that the CBN may be waiting for a more sustained decline before moving ahead with rate cuts to support economic growth.

“As the year slowly comes to an end, investors will continue to observe Nigeria’s hard economic data and inflation figures for hints as to when the CBN might act in 2018”.

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Bitcoin Smashes Through $8,000 for the First time

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Bitcoin hit a new record high on Monday after smashing through the $8,000 level for the first time over the weekend, marking an almost 50 percent climb in just eight days.

The new high came after leading U.S. payments company Square Inc said late last week that it had started allowing select customers to buy and sell bitcoins on its Cash app.

Bitcoin traded as high as $8,197.81 on the Luxembourg-based Bitstamp exchange, up over 2 percent on the day and around 48 percent up since dipping to $5,555 on Nov. 12.

An eye-watering eightfold increase in the value of the volatile cryptocurrency since the start of the year has led to muliple warnings that the market is in a bubble, and institutional investors are broadly staying away.

Retail investors, however, as well as some hedge funds and family offices, are piling into the market. The “market cap” of all cryptocurrencies hit an all-time high of over $242 billion on Monday, according to trade website Coinmarketcap.

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