Pound Unable to Escape ‘Gravitational Pull’ of Dollar – PoundSterlingLive

Written by Joaquin Monfort

Sterling continues to weaken versus the Dollar, unable to escape the ‘larger’ currency’s “gravitational pull”, says Scotiabank’s FX Strategist Shaun Osborne, who sees more downside on the horizon for the pair.

“Daily/weekly price action looks negative, as the recovery from early October has broken down and trend strength indicators are bearishly aligned across short, medium and long-term oscillator signals—this typically means limited scope for gains and more losses ahead,” said the Scotiabank Strategist, who advised traders to, “fade GBPUSD rallies,” in his note.

Osborne sees the pair falling to a target at 1.2000 eventually.

We also see more downside, with a break below 1.2200 confirming more downside to an initial target at 1.2100.

Supporting the bearish view is the MACD, which has crossed below both its signal line and the zero-line and is providing a bearish signal.

GBPUSDDec26

Elliot Wave 5 Down

According to a form of cycle analysis called Elliot wave analysis, the exchange rate could be in a final wave lower.

J P Morgan published such an analysis in October and appears to have been unerringly accurate in describing the pair’s trajectory so far.

J P Morgan’s analysis posits the move down which ended at the October post-tory-party conference ‘Hard’ Brexit lows, as a wave 3, and the recovery since then up to 1.2770 as a wave 4 (see chart below).

They predicted the end of wave 4 in the 1.2650 – 1.2800 zone, which has so far been quite accurate given the early December peak was at 1.2770.

It is now possible that wave 5 is moving down with an eventual medium-term target at the October lows at 1.1450, assuming their analysis is correct.

Wave 5’s are the final impulse waves in the longer term trend.

Wider UK Current Account Deficit Weighs

Recent data has been mixed for the Pound.

UK third quarter GDP data was revised up at the final estimate to 0.6% from the 0.5% previous estimate, and whilst this was a positive sign, especially in the face if Brexit headwinds, it was offset by a widening Current Account deficit during Q3.

The Dollar, meanwhile, continues to rise in expectations of further interest rate hikes by the Federal Reserve in 2017.

A further boost to the Dollar comes from firming expectations of more fiscal stimulus from the President-elect Donal Trump, who currently appears to be backing up his earlier pre-election spending promises, suggesting the policies will not be watered down now he has gained office.

Data for the Pound

The main data release for the Pound this week is the British Banking Association’s data on Mortgage Approvals, which is forecast to show a rise to 41.6k in the month of November from 40.3k in October.

Data for the Dollar

Data for the Dollar kicks off with the S&P Case-Shiller House Price Index in October, at 14.00 (GMT) on Tuesday, December 27, which is forecast to rise by 0.5% month-on-month and 5.1% year-on-year.

Given some analysts are calling for a slowdown in housing in 2017any property-related releases may be the subject of more scrutiny than usual.

On Wednesday, December 28 we have more housing data, first the shape of MBA Mortgage Applications at 12.00 and then Pending Home Sales at 15.00, which are supposed to show a 0.5% rise month-on-month in November.

On Thursday, there is the Advanced Trade Balance in November at 13.30.

Also on Thursday at the same time are Jobless Claims for the week ending December 24, which are supposed to show a 277k rise.

EIA Crude Oil Stocks are released at 16.00 on Thursday and forecast fall to -0.3m barrels, in week ending December 23.

Finally, on Friday, Chicago PMI’s are released and expected to fall to 56.8 in December, at 14.45.

This is then followed by the Baker Hughes Oil Rig Count at 18.00.

Free exchange rate forecasts

Naira records gain, now N485/dollar – Punch

By Oyetunji Abioye

The naira has recorded a major gain against the United States dollar at the parallel market as Christmas celebration weighs on the demand for the greenback across the foreign exchange markets. 

The naira closed at 485/dollar on Friday evening, up from 495/dollar recorded earlier in the day.

The local currency, which was sold on the streets of Lagos and Abuja at 495/dollar on Thursday, had closed at 492/dollar on Wednesday.

On Monday and Tuesday, the naira traded flat at 490, after closing at 487/dollar the previous Friday.

The naira has been under severe and continuous pressure as the scarcity of the US currency continues to create ripples in the financial markets and economy.

Before falling to 487 the previous Friday, the local currency had consecutively closed flat at 485.

The global crash in the prices of crude oil, Nigeria’s main foreign exchange earner, has brought untold hardships on Nigerians.

Economic and financial experts said unless the lingering dollar supply problem abated, the volatility in the exchange rate and the consequent economic challenges might continue.

“The challenge with the forex market is still the supply issue; price (exchange rate) is determined by the interplay of demand and supply,” a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said.

Experts expect the naira to weaken further against the dollar as the Christmas holiday begins this week.

They also argued that the crackdown on the parallel market forex traders and the persistent scarcity of the greenback would make further weakening of the naira inevitable.

A few weeks ago, the naira closed flat at 470 against the greenback over a period of over a week.

The naira had plunged to 470, down from 455 on the back of a fresh dollar shortage at the official and parallel forex markets.

Dollar shortages have caused many companies to halt operations and lay off workers, compounding an economic crisis exacerbated by the fall in global prices of oil, which accounts for over 70 per cent of Nigeria’s budget revenue.

The Central Bank of Nigeria has struggled to support the naira as the country’s external reserves continue to fall.

The naira was quoted at 310.5 to the dollar on the official interbank window on Thursday by commercial lenders.

Meanwhile, the currencies of Uganda, Kenya and Zambia are seen trading sideways in the week to Thursday as most investors closed positions ahead of the end of the year, according to Reuters.

Bitcoin Surges Above $900 on Geopolitical Risks, Fed Tightening – Bloomberg

  • Cryptocurrency jumps to highest level in almost three years
  • Bitcoin is beating all major currencies, stock indexes in 2016 
 

Bitcoin Surges to Outperform Gold, Stocks

Bitcoin headed for its biggest weekly jump since June as rising geopolitical risks boosted demand for alternative assets.

The cryptocurrency surged 15 percent this week to $900.40 as of 2:38 p.m. in Hong Kong, taking its gain this year to 107 percent, data compiled by Bloomberg show. The last time it was at such levels was in January 2014, when bitcoin was tumbling from its record price of $1,137 following the implosion of the MtGox exchange and tightening Chinese controls.

Bitcoin is extending a rally that’s beaten every major currency, stock index and commodity contract in 2016. Buyers sought alternative assets this week amid the killing of Russia’s envoy to Turkey and a separate attack that left 12 people dead in Berlin. Weakening pressure on the yuan, which intensified this month as the U.S. projected a faster pace of tightening next year following Donald Trump’s election win, is also increasing demand for bitcoin in China, where the majority of trading occurs.

“Terrorist attacks in Europe boosted haven demand in capital markets, and gold has been falling since Trump was elected,” said Le Xiaotian, an analyst at Huobi, a Chinese exchange. “Global instability has to a large extent directed funds to the bitcoin market.”

Bitcoin, which trades in cyberspace and is mined by code-cracking computers, is gaining popularity among some investors as an alternative safe haven because it’s deemed to be less influenced by government regulations and changes to monetary policy. Gold, which tends to trade in tandem with bitcoin when haven demand is strong, has fallen this quarter as U.S. rates rise, narrowing its premium over bitcoin to the least in three years.“The Fed’s rate hike announcement has probably spooked a lot of emerging-market investors, particularly those in China, who are now flocking to bitcoin as a refuge from weak fiat currency assets,” said Thomas Glucksmann, head of marketing at Gatecoin Ltd. in Hong Kong. “As we’ve passed the $800 bitcoin price, a strong resistance point in the past, and move closer towards the psychological $1000 stratosphere, anything seems possible.”

    We don’t have forex to import aviation fuel — Marketers – Punch

    By ’Femi Asu

    The scarcity of aviation fuel in Nigeria may be far from being over as oil marketers have said they do not have enough foreign exchange to import the product. 

    The Executive Secretary, Major Oil Marketers Association of Nigeria, Mr. Obafemi Olawore, in an exclusive interview with our correspondent, said, “As long as we don’t have forex, it becomes difficult for us to import. Give us forex and we will be able to bring more.”

    He said the government could not bridge the supply gap for aviation or Jet A1 as done for petrol because of the shortage of forex.

    “Government doesn’t have enough. If they give forex to petrol and to aviation fuel, it will affect other sectors. Now, it is even affecting the aviation sector. So, we are saying the government should try and manage it well so that we will have some forex to bring in aviation fuel.”

    The MOMAN executive secretary said the arrangement with international oil companies for the provision of forex was for the importation of petrol.

    This month, the CBN has asked banks to submit bids for a “special currency auction,” targeting fuel importers to meet demand for matured letters of credit.

    The Executive Secretary, Depot and Petroleum Products Marketers Association, Mr. Olufemi Adewole, said the central bank was making effort to provide marketers with forex.

    He, however, said the rate at which marketers were getting the funds was quite exorbitant and that was why the price of aviation fuel was high.

    “If there is adequate provision of foreign exchange at a reasonable rate that can bring down the price of fuel, then the landing cost will also drop,” he said.

    The marketers are also asking the Federal Government to pay them the foreign exchange differentials for the petrol imports they have made.

    Olawore said said, “We will be glad if all our outstanding foreign exchange differentials and interests are all paid immediately.

    “That will also help us to go to the market to look for forex.”

    On May 11, the government announced a new petrol price band of N135 to N145 per litre, which signalled the end of fuel subsidy.

    Prior to the increase from N87 per litre, the nation had suffered a prolonged and severe petrol scarcity as marketers complained that they could not access forex to import.

    The new price band was based on an exchange rate of N285 against the dollar, reflecting the depreciation of the naira on the black market, where the currency was trading around 320 to the dollar.

    The Central Bank of Nigeria on June 20 floated the naira as it abandoned its 16-month-old peg at 197 to the dollar, effectively devaluing the local currency.

    In spite of the liberalisation of petroleum products and government intervention to ease marketers’ access to forex, the Nigerian National Petroleum Corporation remains the major importer of fuel, especially the Premium Motor Spirit, popularly known as petrol.

    Olawore said when the naira moved from 197 to 285 to a dollar, there was a differential, adding, “When it moved from 285 to 305, there was a differential. Now we are forced to go to the black market, there is a differential.”

    He said the price band of N135-145 for petrol covered up to N285/dollar.

    “But who gets it at N285? Even the government could not sell to you at 285,” he said.

    Fuel shortages often occur in the country during festive periods such as Christmas and Muslim holidays. But there has been no scarcity of petrol this Yuletide.

    Commenting on this, Olawore said, “First, the NNPC has imported much. The second reason is that demand has fallen drastically. Demand has fallen nationwide; people that were filling their tanks are no longer doing so.

    “So, every marketer is suffering from low demand and because of that the quantity in the market is enough for now.”

    He attributed the decline in demand to the recent price hike, saying, “Not many people can afford it.”

    On the forex differentials, Adewole said, “We concluded transactions on the PPPRA imports at the rate of N197/dollar. Naira was devalued and it became what it is today. We have Letters of Credit that have matured and that we have not liquidated.

    “And because government paid us at the rate of N197/dollar, we are saying that whether the naira is devalued or not, that is the rate at which we must get dollars to liquidate those LCs because that was the basis of their calculation and payment to us.”

    He said the payments for the transactions from December 30, 2014 to September 2015 were delayed.

    “The government was supposed to pay within 45 days, but this was not done. The naira was devalued and the government has to bear the difference because we submitted our papers but it did not pay. If it had paid as and when due, we might have liquidated all the LCs because the naira component of the products, which we sold is with us in our banks.

    “We only need that of the government to add to it and pay the suppliers. So, that foreign exposure to foreign banks through our local banks is still there and we are asking government to give us dollar at N197.

    He said the delay in the payment of the outstanding forex differentials was hampering importation “because a lot of marketers’ funds are tied down.”

    NNPC gets 30% discount on contracts after renegotiations – Punch

    By Okechukwu Nnodim, Abuja

     The Nigerian National Petroleum Corporation on Sunday said it realised between five per cent and 30 per cent discounts on existing contracts after several renegotiations. 

    According to the corporation, this arrangement has led to substantial savings for the national oil firm, thus helping to improve its overall performance.

    The Group Managing Director, NNPC, Dr. Maikanti Baru, disclosed this during his end-of-year message to workers of the firm in Abuja.

    He, however, did not provide details of the renegotiated contracts and the amount saved by the corporation as a result of the discounts.

    A statement from the corporation reported him as saying that over the year, the NNPC had adopted strategies to ensure the corporation’s operational profitability, citing the renegotiation of all existing contracts which had enabled his management team to achieve substantial value realisation of between five and 30 per cent discounts.

    “This singular effort alone translated to substantial cost savings in favour of the NNPC,” Baru was quoted to have said.

    He reiterated that the national oil firm had completed negotiations with its joint venture partners towards the resolution of cash call funding challenges through payments of arrears that were owed the partners.

    Baru said this was achieved by developing a clear payment plan as well as the pursuit of an alternative funding strategy, adding that arrears of up to December, 2015 had been fully reconciled and that repayments plan had been settled.

    He said the ultimate objective of the recently signed off agreements between the NNPC and the JV partners was to enable the corporation to transit to an incorporated joint venture model for all the current joint ventures.

    The GMD also vowed to continue to find sustainable solution to the challenge posed by insurgency in the Niger Delta.

    He said the corporation had created security management platforms that would enable it to identify and evaluate risks, develop and superintend implementation of investigations, aggregate and deploy necessary resources to guarantee peaceful business environment in the region.

    Baru attributed the recent increase in the country’s oil and gas reserves to 37 billion barrels and 192 trillion cubic feet, respectively to the relative peace in the Niger Delta.

    He further noted that the NNPC had commenced the implementation of its 12-key business focus areas to enhance the corporation’s performance, adding that arrangements had been completed to put in place structures that would enable smooth implementation of new business models for its companies nationwide.

    Solid minerals sector yields only N2bn in 2016 – Punch

    Agriculture, mines and steel present the quickest means of diversifying Nigeria’s mono-economy, according to experts. Running with this idea, the Federal Government has emphasised mines and steel at every possible juncture. Despite this emphasis, the sector has only boosted the Federation Account by N2bn in 2016, EVEREST AMAEFULE reports.

    The minerals and mines sector has contributed N2bn to the Federation Account in 2016, according to information obtained from the Ministry of Mines and Steel Development.

     

    Compared to the role expected of the sector in a diversified economy, the revenue made from the sector for sharing by the three tiers of government is negligible.

    The Federal Government had never hidden the fact that it looks up to the solid minerals sector and agriculture for the much needed diversification of the economy, given the significant reduction in the earnings from the main base of the nation’s economy, oil.

    In realisation of the nation’s need for diversification, the Muhammadu Buhari-led government has continued to emphasis the reed to exploit the solid minerals sector in order to increase the earning capacity of the country.

    The government signified its interest in the solid minerals sector in the articulation of the 2016 budget. It increased the capital budget of the sector seven times, from N1bn in 2015 to N7bn in 2017.

    While other ministries, departments and agencies may be writhing in unreleased capital budget for the year; that of the Ministry of Mines and Steel Development has been fully released; even with five months left to the end of the 2016 budget implementing year.

    Experts therefore say it is disappointing that despite the emphasis, the mines and steel sector has contributed only N2bn to the Federation Account within the year.

    However, given what had been the lot and performance of the sector in the previous year, some stakeholders believe the N2bn contributed by the sector to the federation account indicates a bright future for the industry.

    Given that the sector contribuýted N700m to the federation account in 2015, N2bn represents almost 200 per cent improvement on the contribution of the solid minerals sector to the coffers of the nation.

    President of the Miners Association of Nigeria, Alhaji Sani Shehu, said although the government did not do much to increase revenue drive in the sector, the N2bn contributed to the coffers of the government represented a significant increase.

    He expressed confidence that the sector would do much better in the years ahead, beginning from 2017.

    Shehu said, “When you compare N2bn to the N700m contributed by the sector in 2015, it is a significant improvement. There is high possibility that the sector would surpass the N3.5bn revenue which the government has projected for 2017.

    “Do not forget that the revenues we get now are mainly from quarries and cement. The core mining activities have not started yielding revenues. So, there is the likelihood that the sector would now be yielding much more to the government beginning from 2017.”

    For the Minister of Mines and Steel Development, Dr. Kayode Fayemi, the most significant thing is that the right foundation is being laid to ensure increased productivity of the sector in the years ahead.

    This, he said, included the articulation of the road map for the reform of the mining sector; the inauguration of the Mining Strategic Team; and the resolution of the legal tussle between the Federal Government and an Indian firm over the contentious concession of Ajaokuta Steel Mill.

    To increase the participation of the state governments, even with the stipulation of the 1999 Constitution that mining is on the exclusive list, the Federal Government has sought innovative means to avoid constitutional breach.

    Fayemi said, “In order to encourage beneficial participation of state governments in the mining sector, we have got approval for the implementation of the constitutionally guaranteed 13 per cent derivation for mineral revenue for states, similar to the derivation that oil-producing states currently enjoy from the federation accounts.

    “While in principle, we cannot give states licences as separate legal entities, companies in which the states have an ownership interest can bid for and receive licences. We are also working closely to build the capacity of state governments in structuring Special Purpose Vehicles to participate in mining in their jurisdictions, without undermining private sector.”

    On securing the finance required to lift up the sector, Fayemi had said, “We sought for N30bn intervention fund from the Federal Government, partly to focus on exploration, formalisation of artisanal miners, and providing access to funding for genuine miners. For the first time since 2004, we got approval for this amount by securing access to the revolving mining sector component of the Natural Resources Development Fund.

    “We are working with the Nigerian Sovereign Investment Authority, the Nigerian Stock Exchange and others to assemble a $600m investment fund for the sector which we hope to conclude and operationalise by the second quarter of 2017.

    “We have secured support from the World Bank for $150m for the Mineral Sector Support for Economic Diversification programme, a critical component of which is to provide technical assistance for the restructuring and operation of the Mining Investment Fund, which will make finance available to the ASM operators through development finance, micro-finance and leasing institutions.”

    He added that the fund would help to bring back on stream previously abandoned proven mining projects such as tin ore, iron ore, coal, gold and lead-zinc.

    So, will the mining sector begin to make significant contribution to the coffers of the nation? Will the nation make the much sought transition from a mineral-rich state to a mining destination?

    Stakeholders believe that incremental revenues are possible but they add that the best this administration can do is to lay the necessary foundation blocks for eventual growth because the transition will take a little more time than anxious citizens are willing to allow.

      Pound to euro exchange rate: Sterling set to SOAR against euro in 2017 – Daily Express

      POUND sterling is set to soar against the euro in 2017 as political unrest intensifies across Europe.

      Britain’s currency is on its way to rise significantly against the sliding euro, according to experts. 

      The EUR/GBP rate will fall to 0.8, down from the current 0.85. 

      That’s the prediction from Xtrade’s Chief Analyst Paul Sirani.

      The range of forecasts for the EUR/GBP rate is the widest it’s been in a decade – from 0.73 – 1.00.

      pound euro exchange rate sterling brexit

      Pound to euro exchange rate: A chief analyst has warned the euro could take a dive against sterling

      According to Xtrade, that range is owed to unprecedented risk in the political climate of the UK and the Eurozone. 

      Mr Sirani said: “This dispersion is largely a function of today’s unprecedented political turmoil, whether you view Brexit’s tortured implementation path or the European political populism threat as the greater risk.

      “Our view is that the muddle and uncertainty plaguing the British process is less threatening than the real and growing risks facing the continent, so look for sterling strengthening to some 0.8 £/€.”

      Uncertainty in the wake of the Italian referendum earlier this month caused the euro to dip. 

      Elections in France and Germany in 2017 could take a similar toll on the European Union’s currency – according to analysts at euroexchangeratenews.co.uk. 

      XTrade’s forecast is supported by comments from Nordea Market’s FX strategist Aurelija Augulyte, who predicts that next year will see British currency strengthen.

      She told Pound Sterling Live: “2016 was a disaster for the GBP, as the unexpected Brexit vote knocked it off most since the Lehman crisis.

      “Next year it will stage a comeback.”

      Although the vote to leave the European Union and subsequent indication from Prime Minister Theresa May that it will be a hard Brexit have weakened the pound, Augulyte says the worst is over. 

      She said: “Now that the ‘hard’ Brexit has become a market’s baseline, should we shift towards a softer form of Brexit – avoiding an exit ‘cliff’ with a transition agreement – the markets will be relieved. 

      “It could happen as PM May will deliver the Brexit plan before actually triggering Article 50.”

      The strategist also thinks Brexit fallout will be overshadowed by Donald Trump becoming President in the United States and the increasing political risk in the Eurozone.