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MARKET PREDICTIONS FOR APRIL 2015

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market report

By Emily Fowler

The expert analysts at City Index have once again cast their practiced eyes over the current financial markets. Their authority forecasts are a beneficial insight into the current markets, and predict what we might need to know for an effective trading strategy in the coming months. Read on for a snapshot of their predictions for April 2015.

Ashraf Laidi, GBP/JPY, Bearish

Emily Fowler

Emily Fowler

The sharp sell-off of the British pound was largely caused by concern over references to deflationary risks made by the Bank of England Monetary Policy Committee members, as Ashraf Laidi discusses this month. With UK inflation hitting an all-time low of zero% in February 2015, the lowest comparable rate ever on record since 1989, will the market expectation that inflation will enter negative ground be correct?

With May bringing the UK general election, it seems likely that another coalition government will be the result, and this uncertainty can only be of detriment to the pound. The possible strength of the JPY seems to stem from a stronger Japanese economy caused by factors that include more competitiveness in the export arena, but how will re-emerging instability in the field of global equities affect the JPY?

Joshua Raymond, EUR/JPY, Bearish

Moving away from the EUR/GBP because of concerns over what effect the UK general election will have, Joshua Raymond looks at the EUR/JPY. Agreeing with Ashraf Laidi when it comes to Japan’s strengthened economy, partly due to an increasing export competitiveness, he is confident in the strength of the JPY, but if an upside break of the Y131.50 barrier happens, could the outcome be different?

James Chen, EUR/USD, Bearish

James Chen correctly predicted the sharp decline of the EUR/USD pair for March, and this month he examines whether this entrenched free fall will continue into April. March brought a new 12-year low for the pair, when the target of 1.0500 was reached mid-month. The dropping of the USD in mid-March following the March 18 US FED meeting gave a high of 1.1037, but this soon retreated and we’re still seeing a weak EUR and signs of the USD ending the recent pullback. So, will we still have a bearish forecast for April?

James looks at the results of the EUR/USD trading under a major resistance area, and shares his views on the next major downside objective.

 MARKET PREDICTIONS FOR APRIL 2015

Kara Ordway, AUD/USD, Bearish

With the RBA rate decision due in April, Kara Ordway examines how much of a risk factor this is to AUD/USD this month. Although iron ore futures are still falling, will the speculative positioning and instability that the RBA decision brings pre-meeting be enough to enable a clear view on the currency pair?

Previous views on the pair were rethought following the recent reversal in the USD following the FOMC, and Kate looks at both the short-term positions, as well as longer-term predictions surrounding end of year forecasts.

Ken Odeluga, FTSE 100, Bullish

With a recent all-time high of 6930.2, Ken Odeluga predicts a continuation of momentum for the FTSE 100, with potential landings of 6837 and 6804-6809 suggesting regained support lying between 6702 and 6740. His simple studies of momentum make it clear whether or not the FTSE will be able to recoup recent losses in the month of April.

Despite the expectation of bearish views in the run up to the UK general election, is the expectation of a coalition government really still able to affect the market that much? Although the FTSE is likely to slow coming up to election date, the index may still hit at least 7065 before then.

Kelvin Wong, Nikkei 225, Bullish

Kelvin Wong looks at the market that has shown a terrible decline of 80% between a high of 39260 in January 1990 and a low of 7606 in April 2003. Since 2008, the Nikkei 225 has risen by an amazing 177%, and February 2015 saw a record high of 18865. But can this great improvement really be sustained?

Kelvin examines the possible outcomes, depending on whether the 19100 monthly pivotal support holds or not, and offers a bullish view as long as technical elements stay positive.

The monthly predictions for each of these markets in full can be found here.

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Barclays announces new trade finance platform for corporate clients

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Barclays announces new trade finance platform for corporate clients 1

Barclays Corporate Banking has today announced that it is working with CGI to implement the CGI Trade360 platform. This new platform will provide an industry leading end-to-end global trade finance solution for Barclays clients in the UK and around the world.

With the CGI Trade360 platform, Barclays will provide clients with greater connectivity and visibility into their supply chains, allowing them to optimise working capital efficiency, funding and risk mitigation. By utilising cloud based functionality for corporate banking clients, Barclays will also be able to offer a leading client user experience through easy access and real-time integration to essential information, combined with the latest trade solutions as the industry-wide shift to digitisation continues to accelerate.

This move underpins Barclays commitment to supporting the trade and working capital needs of their clients and reinforces a commitment to innovation that has been central to the bank for more than 300 years.

James Binns, Global Head of Trade & Working Capital at Barclays, said: “We are delighted to announce our move to the CGI Trade360 platform and to have started the implementation process. We have a longstanding partnership with CGI, and the CGI Trade360 platform will mean we can continue delivering the best possible trade solutions and service to our clients for many years to come.”

Neil Sadler, Senior Vice President, UK Financial Services, at CGI, said: “Having worked closely with Barclays for the last 30 years, we knew we were in an excellent position to enhance their systems. Not only do we have a history with them and understand how they work, but part of the CGI Trade360 solution includes a proof of concept phase, which is essentially seven weeks of meetings and workshops with employees across the globe to guarantee the product’s efficiency and answer all queries. We’re delighted that Barclays chose to continue working with us and look forward to supporting them over the coming years.”

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What’s the current deal with commodities trading?

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What’s the current deal with commodities trading? 2

By Sylvain Thieullent, CEO of Horizon Software

The London Metal Exchange (LME) trading ring has been the noisy home of metals traders buying and selling for over a hundred years. It’s the world’s oldest and largest metals market and is home to the last open outcry trading floor. Recently however, the age-old trading ring, though has been closed during the pandemic and, just a few weeks ago, the LME announced that it will remain so for another six months and that it is taking steps to improve its electronic trading. This news fits in with a growing narrative in commodities about a shift to electronic trading that has been bubbling away under the surface.

Something certainly is stirring in commodities. The crisis has affected different raw materials differently: a weakening dollar and rising inflation risks bode well for some commodities with precious metals being very attractive, as seen by gold reaching all-time highs. Oil on the other hand has had a tough year and experienced record lows from the Saudi-Russia pricing war. It has been a turbulent year, and now prices look set to soar. While a recent analyst report from Goldman Sachs predicts a bullish market in commodities for the year ahead, with the firm forecasting that it’s commodities index will surge 28%, led by energy (43%) and precious metals (18%).

Increasingly, therefore, it seems that 2020 is turning out to be a watershed moment for commodities, and it’s likely that the years ahead will bring about significant transformation. And whilst this evolution might have been forced in part by coronavirus, these changes have been building up for some time. Commodities are one of the last assets to embrace electronic trading; FX was the first to take the plunge in the 90s, and since then equities and bonds have integrated technology into their infrastructure, which has steadily become more advanced.

The slow uptake in commodities can be explained by several truths: the volumes are smaller and there is less liquidity, and the instruments are generally less exotic, essentially meaning it has not been essential for them to develop such technology – at least not until now. This means that, for the most part, the technology in commodities trading is a bit outdated. But that is changing. Commodities trading is on the cusp of taking steps towards the levels of sophistication in trading as we see in other asset classes, with automated and algo trading becoming ever prominent.

Yet, as commodities trading institutions are upgrading their systems, they will be beginning to discover the extent of the job at hand. It’s no easy task to upgrade how an entire trading community operates so there’s lots to be done across these massive organisations. It requires a massive technology overhaul, and exchanges and trading firms alike must be cautious in the way they proceed, carefully establishing a holistic, step-by-step implementation strategy, preferably with an agile, V-model approach.

The workflow needs to be upgraded at every stage to ensure a smooth end-to-end trading experience. So, in replacement of the infamous ring, these players will be looking to transform key elements of their trading infrastructure, including re-engineering of matching engines and improving communications with clearing houses.

However, these changes extend beyond technology. For commodities players to make a success of the transformation in their community, exchanges need to have highly skilled technology and change the very culture of trading. All of which is currently being done against a backdrop of lockdown, which makes things much more difficult and can slow down implementation.

What is clear is that coronavirus has definitely acted as a catalyst for a reformation in commodities. It is a foreshadowing of what lies ahead for commodities trading infrastructure because, a few years down the line, commodities trading could well be very different to how it is now, and the trading ring consigned to history.

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Afreximbank’s African Commodity Index declines moderately in Q3-2020

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Afreximbank’s African Commodity Index declines moderately in Q3-2020 3

African Export-Import Bank (Afreximbank) has released the Afreximbank African Commodity Index (AACI) for Q3-2020. The AACI is a trade-weighted index designed to track the price performance of 13 different commodities of interest to Africa and the Bank on a quarterly basis. In its Q3-2020 reading, the composite index fell marginally by 1% quarter-on-quarter (q/q), mainly on account of a pull-back in the energy sub-index. In comparison, the agricultural commodities sub-index rose to become the top performer in the quarter, outstripping gains in base and precious metals.

The recurrence of adverse commodity terms of trade shocks has been the bane of African economies, and in tracking the movements in commodity prices the AACI highlights areas requiring pre-emptive measures by the Bank, its key stakeholders and policymakers in its member countries, as well as global institutions interested in the African market, to effectively mitigate risks associated with commodity price volatility.

An overview of the AACI for Q3-2020 indicates that on a quarterly basis

  • The energy sub-index fell by 8% due largely to a sharp drop in oil prices as Chinese demand waned and Saudi Arabia cut its pricing;
  • The agricultural commodities sub-index rose 13% due in part to suboptimal weather conditions in major producing countries. But within that index
    • Sugar prices gained on expectations of firm import demand from China and fears that Thailand’s crop could shrink in 2021 following a drought;
    • Cocoa futures enjoyed a pre-election premium in Ghana and Côte d’Ivoire, despite the looming risk of bumper harvests in the 2020/21 season and the decline in the price of cocoa butter;
    • Cotton rose to its highest level since February 2020 due to the threat of storm Sally on the US cotton harvest, coupled with poor field conditions in the US;
    • Coffee rose 10% as La Nina weather conditions in Vietnam, the world’s largest producer of Robusta coffee, raised the possibility of a shortage in exports.
  • Base metals sub-index rose 9% due to several factors including ongoing supply concerns for copper in Chile and Peru and strong demand in China, especially as the State Grid boosted spending to improve the power network;
  • Precious metals sub-index, the best performer year-to-date, rose 7% in the quarter as the demand for haven bullion continued in the face of persistent economic challenges triggered by COVID-19 and heightening geopolitical tensions. In addition, Gold enjoyed record inflows into gold-backed exchange traded funds (ETFs) which offset major weaknesses in jewellery demand.

Regarding the outlook for commodity prices, the AACI highlights the generally conservative market sentiment with consensus forecasts predicting prices to stay within a tight range in the near term with the exception of Crude oil, Coffee, Crude Palm Oil, Cobalt and Sugar.

Dr Hippolyte Fofack, Chief Economist at Afreximbank, said:

“Commodity prices in Q3-2020 have largely been impacted by COVID-19. The pandemic has exposed global demand shifts that have seen the oil industry incur backlogs and agricultural commodity prices dwindle in the first half of the year. The outlook for 2021 is positive however conservative the markets still are. We hope to see an increase in global demand within Q1 and Q2 – 2021 buoyed by the relaxation of most COVID-19 disruptions and restrictions.’’

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