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    FX: Markets facing the jitters - Rabobank Sandeep Kanihama

    Jane Foley, Research Analyst at Rabobank, suggests that it is fair to say that the poorer tone of the USD on the back of the shockingly weak US nonfarm payrolls report has facilitated the rise in the value of NZD/USD recently.Key Quotes “That said, we would question whether the NZD can sustain these gains given other signs that risk appetite may be waning.A study published by America Think Tank Pew Research highlights there is already significant opposition in key European countries to an ever closer EU. The Pew survey suggests that a median of just 51% across 10 EU countries surveyed have a favorable view of the European Union. A median of 42% in these 10 nations want more power returned to their national capitals. Notably support for the EU is even lower in France than it is in the UK with 61% of French surveys holding an unfavourable view compared with 48% of Britons. The survey also shows that much of the disaffection with the EU among European stems from its perceived handling of the immigration crisis although the EU is also being heavily blamed for poor management of economic issues.In many respects the result of the Pew study, which have also been mirrored by other surveys, is evidence of widespread voter disgruntlement. Despite years of extraordinary monetary policy accommodation, growth remains low and wage rises muted while asset price inflation has resulted in worsening wealth inequality.Political risk is not just an issue in Europe. Later in the year, the US election could be a risk for markets. Political uncertainly has the effect of subduing investment and this could impact growth. Yesterday the World Bank cut is 2016 growth forecast to an ‘insipid’ 2.4% from a forecast of 2.9% made in January. This does not bode well for risk appetite and is bad news for commodity producers. Although supply disruptions in the oil market have recently lent support to crude prices, oversupply is still very evidence in commodities as varied as iron ore and dairy. We remains bearish on the NZD and the AUD and see risk that the CHF and the JPY will remain well supported in the coming weeks.”

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