Tax Reforms Twist & Turns, Brexit Talks Resumes

Tax reforms in the US remains big on investors minds as a delay which they are are uncomfortable with lingers. USD/JPY lost 0.2% dropping to 113.22.  US senators are paring some of the corporate tax cuts in an effort to keep the impact of the proposed bill under $1.5 trillion. Republican senators are pushing back the timelines on reducing the corporate tax rate until 2019 and will water down the original plan introduced by the Trump Administration. Treasury Secretary Steven Mnuchin has already said that a delay is better than a longer phase in. The amount of differences between the Senate proposal and the one working its way through the House of representatives are considerable and increase the chances of the tax overhaul not being a reality in 2017.  Unemployment claims was disappointing rising to 239,000 falling short of analyst forecast by 7,000. This is opined to come on the back of improvement of claims processing disrupted by the hurricanes. Despite the increase, claims remain far below the 300,000 mark. This feat, which holds true for the 139th consecutive week (the longest since 1970),  signals a robust jobs market. Wholesale inventory data was just in-line with investors expectations at 0.3%. Though the US is on a bank holiday, prelim consumers sentiments and inflation expectations are data to look for on the release front.

GBP/USD shrugged off Brexit noise as it rose 0.11% to 1.3131 given unimpressive economic data from the US. The Brexit talks resumed and Britain's financial obligation to the EU remains a challenge. The European Union is demanding EUR 60 billion, while Britain has countered with an offer for EUR 20 billion. The trade deal is most important to Britian, but the Europeans are insisting on more progress on the fulfillment of financial obligations as well as on other non-trade issues. If the sides still remain deadlocked in December without no deal in sight, hardliners on both sides could derail the talks completely, which would send shivers up the spines of investors and hurt the British pound. The Prime Minister's ability to follow through with Brexit remains a major issue as two ministers recently to resign from May's cabinet forcefully, and she hasn't been able to present a coherent Brexit policy to the Europeans or to the voters at home. BoE chair Mark Carney expressed concern at the lack of uncertainty over a final deal with the European Union, saying that the economy "should really be booming, but it's just growing." Economic data expected from the UK are manufacturing production, trade balance, construction output & industrial production all of which will dictate the direction of the pound today. GBP/USD & GBP/JPY traded flat during the Asian trading session.

The Euro was upbeat in Thursday's trading rising to 1.1653 against the dollar. The ECB's growth forecast for 2017 put the Euro-area's growth at 2.2%, 5 percentage points higher that the prior 1.7%. Its forecast of the UK's growth however fell to 1.5%. while it projects a slowdown for the nation in 2018-19 as well. Germany's trade balance rose above analyst forecast to 21.8b. Investors will be looking out for French industrial output and Prelim private payroll. Italy's industrial production is also expected to come in today. The currency remained flat against the dollar during the Asia session.

The RBNZ delivering what was perceived as a "hawkish hold" of rates at record low levels returned momentum to the NZD as it gained 0.2% rising to a 2 week high against the dollar to 0.6979 earlier in the day before it retreated. Despite the pullback, the pair retained most of its gains. Neighbors Australia had its Reserve Bank lower inflation forecast all through 2019. Although this was the likely outcome due to the change in CPI measurement methodology, AUD/NZD could experience a sell-off  given the divergent monetary policy rhetoric of late between the RBNZ and RBA.

Commodities data showed Gold returned to a bullish run as the dollar wars with tax reforms. The yellow metal rose to 1,288. Brent crude retained it's above $60 price.

RBNZ in Focus, Tax Reforms Rides the Dollar

Jolts jobs opening returned the dollar to a rally as it beat analyst expectations staying at 6.09m. This aided the USD's return upwards gaining 0.28% against the Canadian dollar rising to 1.2807. Fitch raised US debt to GDP ratio on the back of the effect current tax reforms would have on federal deficit. The house remains divided on the tax reforms as Democrats and some Republicans are uncomfortable with the effect the tax cut would have on debt. News filtering in during the Asian session notes that US Senate Republicans may delay the corporate tax cuts by 1 year. But details could change ahead of Thursday's formal release of the bill by the Senate Finance Committee.  Crude inventories are expected in today analyst have forecasted  -2.5m as against the prior week's -2.4m.


The RBNZ will later today announce its stance on interest rate as it concludes its 2 day monetary policy meeting. Expectations are that the official cash rate will be left unchanged at 1.75%. The Labour party's intention of including full employment to the RBNZ's responsibility may come to fruition as reports indicates the party is reviewing the dual function of the Central Bank. This could also include the addition of external members to the monetary policy committee which presently consist of the RBNZ chair and his deputy. Trading during the Asian session brought back NZD/USD to 0.6917 after it slid to 0.6890 in the course of trading yesterday. A dovish rate statement may push the currency pair further down south.

The Euro took a plunge in the course of trading on Tuesday as it fell to a low of 1.1557 against the dollar. Investors ignored a higher than forecasted retail sales data as German Industrial Production, French Balance Budget and Retail PMI were not as impressive. Retail sales rose to 0.7% from -0.1% the prior period and above analyst forecast of 0.6%. 3 of ECB policymakers according to sources familiar with the ECB, wanted a tighten of the central bank's quantitative easing program even if inflation remains soft. Note that, the ECB announced on October 26 to continue buying bonds until price pressures increase. The ECB chief, Mario Draghi, did not comment on monetary policy at the second ECB Forum on Banking Supervision on Tuesday, while the ECB board member Sabine Lautenschlaeger said she "would have liked a clear exit" from the asset purchase program. Besides the French trade balance, the Euro-area would have a quite day in terms of economic data.

The British Pounds returned northward on the back of Halifax HPI being much in line with analyst expectations. The index rose to 0.3% down from the prior period's 0.8% but above a 0.2% forecast. GBP/USD rose to 1.3176 but retreated during the New York session on the back of brexit pressures as investors wait for negotiation to enter the next stage. It rose back to 1.3168. News on Brexit and economic data from other major currencies will dictate the tune of the pound for the day as there is no economic data expected from the UK today. GBP/JPY traded flat during the Asian session.

The RBA's retention of cash rate at 1.5% led the Aussie down a bearish path to 0.7630 against the dollar. Inflation being below the Central Bank's band of 2-3% and rising household debt continues to hold down interest rate. China's trade balance if positive could return AUD/USD upwards.


On the commodities side, gold erased Monday's gains falling to 1, 272 as the dollar rebounded. Oil prices remained above $60 on the back of the mid east tumult. OPEC in its 2017 world oil outlook forecasted a rise in shale production and demand growth for the next 2 years

RBA, RBNZ takes the Floor

The RBA & the RBNZ will be taking their turn this week to announce their stance on interest rate. The RBA is expected to leave rates unchanged as Australia struggles with rising household debt and inflation remains way below the Bank's 2-3% target. The AUD has been on a downward spiral against the dollar since the release of soft retail sales number in October. Over in New Zealand, the RBNZ will also be meeting to decide on interest rate this week. The Labour party's election win dragged down the Kiwi dollar against other major currencies as the party's inexperience made investor's uncomfortable. A better than expected jobs data however reminded investors of the country's strong fundamentals despite lower growth outlook. The acting governor of the RBNZ will be expected to announce no change in cash rate but investors already anticipate a rate change at the next meeting. The Asian trading session saw the release of q/q inflation expectation which fell to 2% from 2.1% in August. This pulled down NZD/USD by 21 pips dropping to 0.6885 as at the time of writing. m/m ANZ commodities prices also fell to -0.3% from 0.8%.


USD gracefully went through the event full week coming out almost unscared as it recovered from the beating it took at the release of poor non-farm payroll numbers. EUR/USD rose to 1.1689 reacting to a decline in NFP,  before retreating back to 1.1607. President Trump confirmed Jerome Powell as the next Fed Chair, he is expected to carry on with the present monetary policy stance of gradual  rate increase, while the house released the tax bill. The new week will be a bit quite for the dollar in terms of economic data. The greenback's resilence despite the stormy week signals it may soon resume a rally.

 The Euro which had a quite week continued to suffer from post-ECB meeting reactions dropping to a low of 1.1606 against the dollar and EUR/CAD fell to 1.4808. The Euro's week will be dominated by final services PMI and other industrial & trade data from across Europe. A stronger Euro has triggered worries of lower export in some ECB policymakers hence, trade data will be watched closely. 8am today will see the release of some of these data which would shape the tune of the Euro for the new week.

BoE's highly anticipated meeting threw the pound down south as GBP/USD fell to 1.3058 despite a rate hike. This is a positive for UK exporters as weaker pound makes UK goods cheaper for trade partners. Industrial and trade numbers are also expected in the UK this week. The manufacturing sector remains a strong driver of UK's GDP post brexit as it bouyed  the country's faster than expected q3 GDP.

USD/JPY fell to 114.00, but has rebounded during the Asian session climbing up to 114.73. The Bank of Japan kept monetary policy unchanged at its meeting the prior week, but with a dovish BoJ, the discussion appears to be shifting to whether further measures are needed to accelerate the journey towards reaching the 2% inflation target. The summary of opinions of the October meeting, due on Thursday, should provide some insight as to how far the discussions went on the dissenting board member's view to start targeting the yield on 15-year Japanese government bonds in addition to 10-year ones.

On the commodities side, Gold plunged to 1,266 in Friday's trading while Brent crude rose by 0.29% to $62.25 as support grows for OPECs oil cut extension and Saudi clamps down on its corrupt leaders.

Dollar Subdued, BoE Rate Hike Dovish

An inverse relationship seems to exist between the BoE's rate hike and the GBP as the currency lost 1.3% against the dollar after the Central Bank announced the new rate of 0.5%. The decline of the pound comes on the back of  the dovish statement from the BoE. Though the rate was raised for the first time in 10years from 0.25% to 0.5%, Gov Carney notes that further hikes will be gradual given Brexit's effect on the economy. The pound fell to 1.308 against the dollar after the announcement. The BoE also cut down its projections for economic growth to 1.7% from 1.8%. On the release front, the UK's construction PMI improved to 50.8 from 48.1 the prior period, signalling expansion in the sector. Services PMI will come in today, forecast show 53.3, a higher than forecasted Services PMI could give the pound a lift.


The FOMC minutes were as investors expected,with the Fed reiterating the December hike and temporary soft inflation numbers. The dollar retreated gains as investors await the announcement of a new  Fed chair. Lower jobless claims of 229,000 wasn't enough to draw positive sentiment to the dollar. The market was waiting for President Trump to announce Jerome Powell as the new Fed chair all through Thursday. Jerome Powell is said to be favoured by President Trump as he will maintain the status quo of slow rate growth, which is in-line with Trump's aim of keeping interest rate lower and the dollar soft.  Other data released include preliminary non-farm productivity at 3% higher than the prior period's 1.5% and preliminary unit labour cost at 0.5% same as analyst forecast. USD/CAD fell to 1.2805 . Investors will be looking to non-farm payroll, ISM non-manufacturing PMI, wage growth & trade balance for the direction of the dollar today.

Though EUR/USD rose to 1.1686 during the New York trading session, it stayed within the range established since the ECB policy announcement last week. The pair was last at 1.1668, with the US dollar getting most of the attention this week due to the various key risk events out of the US, in contrast to the relatively more quiet news flow about the EURO. No major economic data is expected from the Euro-area today.

The Canadian dollar posted gains against the USD as USD/CAD retraced to 1.280. Canadian employment data and trade balance will be in today, if these data fall short of analyst expectations and the US releases impressive data, the pair would move back to 1.29 levels.

The Asian session saw the AUD/USD slide down to 0.7685 given lower than expected retail sales data. Positive services PMI from China wasn't enough to return the bulls to the currency pair. The AUD has been weak against other major currencies since the release of soft inflation numbers last week.

On the commodities side, Gold posted little gains rising to 1,283 during the New York trading session, the yellow metal remains below the 1,300 psychological level. Oil prices remained in the greens with Brent crude gaining 0.35% to $60.83. OPEC's November 30th meeting will determine if the bulls will remain with oil prices.

GBP Stays Strong Ahead of BoE Meeting

A 2 day FOMC meeting kicked off yesterday with the release of a rate expected later today by 19:00. Investors anticipate no rate change till December. A hawkish statement by the FOMC will likely not have significant impact on the dollar, as the expectation of a rate hike has been fully priced in by investors. Inflation however has been soft for most part of the year. The core PCE price index (a measure of inflation focused on by the Federal Reserve), started the year at 1.9% but dropped to 1.3% in September. This may make some Fed committee members uncomfortable about raising rates until inflation tilts closer to the Fed's 2% target. The Fed Chair Janet Yellen noted recently that the weakness in inflation is temporary, this is expected to be reiterated in today's announcement. Any change from the Fed on inflation outlook in the statement to a more cautious one would be perceived as dovish which would send the dollar southwards. This coupled with the effect the ongoing Russian investigation could have on the presidency would lead to volatility in the dollar. Investors also await the announcement of a new Fed Chair before the end of the week, nominees have been narrowed down to Jerome Powell & John Taylor. News coming from the white house says Jerome Powell is favored to take the position, this may not seat well with investors as John Taylor is preferred for his hawkish stance.

Data from the US showed higher than expected Chicago PMI & CB Consumer Confidence. Continuous positive data from the US have pushed the dollar up against other major currencies. The dollar traded at 1.290 against the loonie during the New York trading session. ADP non-farm employment change, ISM manufacturing PMI & crude inventories are economic data coming out of the US today.

The Bank of England takes center stage on Thursday as investors expect the first rate hike in 10 years. This is already being priced in, as the pound rose to 1.3289 against the dollar despite a -10 GfK Consumer Confidence index. Monetary Committee members however remain divided on a rate hike, while some policymakers point to a higher than target inflation as a reason for a rate hike, the other points to low consumer spending as signalled by soft retail sales as basis to retain interest rate at current level. Manufacturing PMI will be released today, analyst have forecasted 55.8 a 0.1 drop from the prior month's 55.9.

The Euro-area released inflation and GDP data, and the results were mixed. CPI Flash Estimate edged down to 1.4%, shy of the forecast of 1.5%. Core CPI Flash Estimate dipped to 0.9%, short of the estimate of 1.1%. There was better news from Preliminary Flash GDP, which beat analyst expectations by 0.1 percentage points at 0.6%. Unemployment continues to head lower, dropping to 8.9%, lowest level since March 2009. The ECB last week announced it will begin tapering its asset purchase program, as the Euro-area economy has rebounded in 2017. Inflation however remains below the ECB's target of 2%. The asset purchase program has been extended to April 2018, but the ECB could implement an extension if economic data tails off or if inflation fails to move upwards. No economic data is expected from the Eurozone today, while France & Italy are on bank holidays

The Spanish government seems to have Catalonia under its control after effecting article 155 of its Constitution earlier on in the week. The central government is pressing charges of rebellion on the ousted Catalan president CarlesPuigdemont, a charge which carries a 30year jail term. CarlesPuigdemont has however been reported to be hiding in Brussels. It remains unclear what Puidgemont will do next - he could request political asylum or even declare a government-in-exile. Elections have been slated for December 21, and two parties from Puidgemont's coalition have declared they will participate in the election. Investors are keeping a close eye on happenings in Spain.

Canada continued with the release of unimpressive economic data. The country's GDP for the month of October slid to -0.1%, USD/CAD jumped to 1.2907 after the data was released The contraction was partially attributed to maintenance shutdowns in the chemical and extractive industries and is consistent with last week's decision by the Bank of Canada to cut its projections for Q3 annualized growth to 1.8% from 2.0%. The BoC will be comfortable with a slowdown as it would help curb increased borrowing cost. Investors will be looking out for the Canadian manufacturing index and Governor Poloz statement later in the day.

A strong dollar continues to put gold under as the yellow metal is still trading below the 1,300 psychological level. Gold is negatively correlated with the dollar. Oil prices remain high gaining 0.33% to close at $61.14. Oil prices have been burgeoning since Saudi Arabia & Russia showed support for continuation of production cut.

BoE, BoJ Takes Center Stage as New Fed Chair Emerges this Week

The bulls were all blazing for the dollar all through the prior week. The approval of 2018 budget at the senate signaled renewed drive towards the achievement of President Trump's tax reforms before the end of the year. This together with speculations surrounding who to assume the position of the next Fed head had the dollar on an upward reel. Announcement of the new Fed chair along with the US major jobs data (non-farm payroll) comes in on Nov 3rd, while a FOMC meeting will hold on Nov 2nd. The FOMC meeting won't be eventful as rates are not expected to go up till December. Jerome Powell seems to be favoured as the next Fed Chair, this may not seat well with investors as their eyes are set on John Taylor who is more on the hawkish side.

Analysts have forecasted a rise in non-farm payroll to 311,000 following the drop to 33,000 the prior month. All of these will weigh heavily on the performance of the dollar in the coming week.

European Central Bank's decision to cut down its Asset Purchase Program (APP) by half and at the same time suggesting it will come to the market's aid if there be signs of a reversal effect on the Euro-area's economy sent the Euro on a downward spiral as investors perceived it as dovish. The Euro sank to record low of 1.1609 against the dollar. The new week is laced with final manufacturing PMI from all across Europe. 8am today will see the release of Germany's retail sales & m/m CPI numbers, Spain will also release its y/y CPI & q/q GDP by 9am, this should set the tone for the EURO as the week commences.

Spain in the course of the weekend implemented article 155 on Catalonia, taking over all forms of authority and setting Dec 21 as the date for elections in the region. This comes after the region's autonomous authority declared Independence. The Spanish government is now in charge of the region's police force and civil service. Spanish prosecutors meanwhile plan to start pressing rebellion charges against Carles Puigdemont and his ousted government, these charges carry a 30 year jail term. The problem remains internal but heightened tensions will not go well for the Euro.

GBP has a busy week ahead with different economic data due for release. All eyes will be on the Bank of England's meeting scheduled to hold on Thursday. This would definitely take the Shine off the FOMC meeting as policymakers are divided on whether or not there should be a rate hike. A rise in UK's inflation to 3%, 1% above the apex bank's inflation target advances the case for a rate hike but low consumer spending as shown in recent economic data signals a rate hike might be a little premature.

News coming in the course of the weekend notes the EU is shifting focus away from Brexit to concentrate on more pertinent issues coming up in 2019, such as the European Parliament's elections. This is considered a positive for Brexit as it will make it politically easier for the assembly to approve any deal on the terms of Brexit.

Aussie, Kiwi & Loonie all bowed to the power of the dollar in the past week. Unimpressive jobs data from Australia, investor’s low confidence in New Zealand's new government and dovish stance of the Bank of Canada had all three currencies in investor’s black book. Australia's trade balance, retail sales & China's manufacturing data if positive could change investor's sentiment towards the AUD. Employment data from Canada and New Zealand are economic data on investors mind for both currencies this week. Indications of an improving labour market in New Zealand may give support to the NZD in the course of the week.

The Bank of Japan (BoJ) will also take center stage this week. Expectations are that it will continue with its economic expansionary stance as inflation is still below 1% giving life to threats of deflation. Retail sales released during the Asian trading session improved to 2.2% but dropped 0.1 percentage points below analyst forecast. The Yen will remain weaker against other currencies given policy divergence even as the Japanese economy gains momentum.

The Asian trading session was uneventful given low volumes in the market.

Gold prices remained below 1,300 as dollars gained momentum in the prior week, while Brent crude reached a high of $60 as OPEC plans to extend oil production cut beyond March 2018 with backing from Saudi-Arabia and Russia.

Oando Contests Suspension in Court, Faults SEC’s Decision

The management of Oando PLC on Tuesday said it had obtained an order of court restraining the Nigerian Stock Exchange, NSE, from placing its shares on technical suspension.

A statement signed by the oil firm’s spokesperson, Alero Balogun, and the Chief Compliance Officer, Ayotola Jagun, on Tuesday faulted the decision of the Securities and Exchange Commission, SEC, and the NSE.

The NSE had last week suspended trading on the shares of the oil firm.

The bourse said it was acting on the directive of the SEC.

On Monday, the bourse relaxed its sanction and placed the company’s shares on technical suspension, saying trading on its shares will not affect prices.

But Oando in its statement Tuesday evening said that on Monday it obtained an ex-parte order from the Federal High Court granting an interim injunction “…restraining the NSE and any other party working on their behalf from giving effect to the directive of the SEC to implement a technical suspension of the shares of the company pending the hearing and determination of the motion for injunction.”

The company also said it obtained a court order restraining the SEC from conducting an audit into its finances pending the hearing of the motion.

The statement said that the notice had been served to the regulatory bodies on Tuesday, adding that the bodies are expected to comply henceforth.

Similarly, the firm said it took its decision because the SEC acted without having concrete evidences, noting that it concluded without thorough investigations.

The statement also condemned the regulatory body’s decision to audit expenses in the company’s books saying it was not in the best interest of shareholders.