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SocGen and Kyriba to streamline FX hedging - Industry roundup: 26 February

Flash PMI data shows slowing euro contraction; expansion in UK and US

Business activity in the euro area fell at the slowest rate for eight months in February, according to provisional PMI survey data, as a stabilisation of output in the service sector offset a further steep downturn in manufacturing. Business confidence about the year ahead improved, hitting a ten-month high and encouraging firms to raise staffing levels at a pace not seen since last July, adding to signs that the eurozone’s downturn is moderating.

The seasonally adjusted HCOB Flash Eurozone Composite PMI Output Index, based on approximately 85% of usual survey responses and compiled by S&P Global, rose from 47.9 in January to 48.9 in February. Although signalling a ninth consecutive month of falling output, February’s decline was the smallest since last June. While the latest reading suggests that the eurozone’s deepest contraction since 2013 (if early pandemic months are excluded) has persisted into 2024, the rate of decline is showing signs of moderating in the first quarter.

In the UK, business activity across the private sector expanded for the fourth consecutive month. At 53.3 in February, up from 52.9 in January, the headline seasonally adjusted S&P Global Flash UK PMI Composite Output Index signalled a solid rise in business activity, supported by another strong upturn in the service economy. February data highlighted a solid improvement in customer demand, signalled by the sharpest increase in new work for nine months. Hopes of a sustained rebound in domestic economic conditions led to the highest level of optimism regarding the year-ahead business outlook since February 2022.

Over in the US, companies continued to report an expansion in activity during February, albeit at a slower pace. At 51.4, the headline S&P Global Flash US PMI Composite Output Index fell from 52.0 in January. Still, the pace of expansion was the second-fastest since July 2023, as manufacturers and service providers recorded growth in output. A softer uptick in services business activity weighed on overall growth. Manufacturing, meanwhile, saw a renewed increase in production amid an improvement in supply chains after adverse weather in January.

 

SocGen and Kyriba to streamline FX hedging

Societe Generale and Kyriba have launched connectivity between the tech vendor’s financial transaction management module and SG Markets, the bank’s B2B platform. The API-based connectivity between the platforms allows mid-cap corporates in France to execute their hedging with a single click. Hedges arranged in Kyriba are then automatically pre-populated in the SG Markets platform to be executed. Societe Generale’s clients only have to validate the execution. Also, this connectivity eliminates reconciliation work, as SG Markets updates FX positions in Kyriba automatically, in real-time.

Single entry helps finance departments reduce execution and reconciliation risks and optimise the execution of hedging policies by implementing more efficient organisational perspectives.

“Currency market volatility continues to impact the financial performance of European companies,” noted Edi Poloniato, Global Head of Banking Solutions at Kyriba. “The partnership set up with Societe Generale allows us to expand our solutions for optimising foreign exchange risk management.”

 

Lloyds Bank joins WaveBL electronic trade documentation platform

Lloyds Bank says it has become the first UK bank to join the WaveBL electronic trade documentation platform. The move aims to unlock trade efficiencies and sustainability benefits for its clients by using electronic bills of lading (eBLs).

The vast majority of bills of lading are currently in paper form. Through this partnership, Lloyds Bank’s clients will now be able to transfer fully digital, blockchain-based eBLs between organisations on the WaveBL network, which has members in 136 countries and includes four of the world’s ten largest container shipping carriers.

The system means eBLs can be passed between parties in minutes, compared to days for paper versions. It should also eliminate the risk of forgery, loss and theft of paper versions and reduce the environmental impact of bills of lading by removing the need for paper products and a physical document transfer process.

“Paperless trade is the future, with tremendous benefits on offer in terms of economic growth, increased efficiency, reduced risk and environmental sustainability,” said Rogier van Lammeren, head of trade and working capital products at Lloyds Bank. “Collaboration and innovation are two of the key factors that will drive and support greater adoption. This new partnership with WaveBL is an example of both in action. Our clients now have easy access to a global platform for eBLs to complement our existing suite of digital trade documentation solutions – enabling them to capitalise on opportunities quickly and securely, while reducing their impact on the environment.”

 

Gold prices are forecast to rise 6% in the next 12 months

Gold prices are poised to rise as central banks purchase more of the precious metal and as strong retail demand in emerging markets bolsters prices, according to Goldman Sachs Research.

The price of gold is forecast to climb about 6% in the next 12 months to US$2,175 a troy ounce, Nicholas Snowdon, head of metals in Commodities Research, and analyst Lavinia Forcellese write in their team's report. They point out that gold prices may trade in a range in the near term, amid uncertainty about Federal Reserve interest rate policy. Gold, which doesn't offer yields, tends to be less attractive to investors when interest rates are higher. The downside risks to gold prices are expected to be limited by several key factors.

Firstly, central bank purchases are strong and geopolitical tensions are high. Central banks purchased an average of 1,060 tonnes from 2022 to 2023, compared to 509 tonnes purchased from 2016 to 2019. The increase comes as China shifts reserves away from US dollars and countries such as Poland increase their gold reserves.

Additionally, investment demand for gold has yet to rebound. Historically, changes in exchange-traded fund holdings have tended to be triggered by major risk-off events (when the appetite for risk declines) and by cycles of easier monetary policy. The analysts expect ETF holdings to climb once the Fed starts cutting rates, which Goldman Sachs Research economists think could begin as early as May.

Finally, strong retail demand for gold could propel its price higher. The “wealth effect” of rising incomes in emerging markets drives consumer demand for gold, especially in jewellery. “The rapidly growing cohort of ‘affluent' consumers in India...will drive growth in jewellery consumption,” Goldman Sachs Research analysts write. In China, gold was one of the best-performing assets in 2023, driven by weak consumer confidence and concerns about growth that boosted demand for the “safe haven” of gold.

In related research, with gold prices influenced by geopolitical instability and market uncertainty, the price per ounce (ppo) of the precious metal worldwide has increased significantly in recent years, according to the analytical experts at NLcasinospot. In 2017, the ppo stood at US$1,257.12; by 2020, it hit US$1,773.73; and last year gold’s ppo reached US$1,940.54. Unlike many other assets, gold is mainly unaffected by downturns in stocks and other markets, offering a reliable safeguard against the depreciation of money.

 

ECB survey shows a further decrease in consumer inflation perceptions

The ECB’s Consumer Expectations Survey (CES) shows that the median rate of perceived inflation over the previous 12 months decreased further, for the fourth consecutive month, to 6.0%, from 6.9% in December. Median expectations for inflation over the next 12 months edged up to 3.3% from 3.2%, while those for inflation three years ahead remained unchanged at 2.5%. 

The CES is a monthly online survey of around 19,000 consumers aged 18 or over from 11 euro area countries: Belgium, Germany, Ireland, Greece, Spain, France, Italy, the Netherlands, Austria, Portugal and Finland. 

Inflation expectations at the one-year and three-year horizons remained well below the perceived past inflation rate. Uncertainty about inflation expectations over the next 12 months remained unchanged. Developments in inflation perceptions and expectations remained relatively closely aligned across income groups, albeit somewhat higher for the two lowest income quintiles. Younger respondents (aged 18-34) continued to report lower inflation perceptions and expectations than older respondents (those aged 35-54 and those aged 55-70).

Consumer expectations for nominal income growth remained unchanged at 1.2%. Perceptions of nominal spending growth over the previous 12 months decreased further to 6.6% from 6.8% in December, their lowest level since October 2022. This decrease was observed across all age groups. Expectations for nominal spending growth over the next 12 months increased marginally to 3.7% from 3.6% in December. Once again, spending perceptions and expectations very closely followed the developments in inflation perceptions and expectations.

Economic growth expectations for the next 12 months were less negative, standing at -1.1%, compared with -1.3% in December. Expectations for the unemployment rate 12 months ahead decreased to 10.9% from 11.2% in December. Consumers continued to expect the future unemployment rate to be slightly higher than the perceived current unemployment rate (10.6%), implying a broadly stable labour market. However, quarterly data show that unemployed respondents reported an increase in their expected probability of finding a job over the next three months, which rose to 30.5% in January 2024 from 27.6% in October 2023. Employed respondents also reported that the expected probability of job loss over the next three months decreased to 8.0% in January from 9.0% in October.

 

Ebury and Nium step up Brazil cross-border payments plan

Ebury has announced its partnership expansion with Nium to deliver a global remittance service in Brazil. The announcement follows regulatory approval of Ebury’s acquisition of Brazilian fintech Bexs, which includes the businesses Bexs Banco (foreign exchange) and Bexs Pay (payments) in October 2023. The institution is known as Ebury Bank in Brazil, reflecting the local FX banking licence held in the country.

Together, Nium and Ebury aim to enable businesses to send or receive fast, reliable, and affordable cross-border payments to and from Brazil. This builds on the duo’s existing European partnership, in which London-based fintech Ebury uses Nium’s global payments infrastructure to send international supplier and payroll payments worldwide. 

Nium’s bulk cross-border payments solution for banks and financial institutions will be integrated into Ebury’s high-scale payment flows to improve the speed, efficiency, and cost of international business transactions. The partnership also aims to enhance Brazil’s connection to new emerging markets that would otherwise be out of reach. Currently, Nium’s payment network supports payouts in over 100 currencies to more than 190 countries, 100 of them in real-time.

Brazil’s digital payments market is projected to grow to a total transaction value of US$170bn in 2024, according to Statista. Government statistics indicate there are over 21 million SMEs in Brazil today, with an estimated population of over 215 million people.

“Brazil has tremendous potential to set a global example in digital payment innovation,” said Christina Hutchinson, General Manager, Brazil and Head of Business Development, LATAM at Nium. “But today, businesses and individuals here continue to face costly hidden fees, significant delays, and uncertainty every time they send or receive international payments via traditional wires or legacy banking systems. We are thrilled to expand our existing collaboration with Ebury in Europe to help Brazil’s underbanked SME and consumer population access more affordable and efficient ways to send and receive money.”

 

Silent Eight expands HSBC transaction screening solutions partnership

Regtech firm Silent Eight has announced the expansion of its relationship with HSBC to implement Automated Alert Closure for Transactions, which automates investigation and resolution of alerts in real time.

To date, Silent Eight supplied HSBC with name screening and adverse media automation solutions that supported the bank’s financial crime detection. This expansion aims to improve the bank’s compliance operations further. 

“In the realm of financial transactions, precision is paramount,” commented Chris Pratt, Group Head of Transaction Screening, HSBC. “Working with Silent Eight is not only about driving efficiency in screening, but ensuring accuracy. Our further investment in Silent Eight technology underscores our strategy to deliver safe automation and improved outcomes for our customers.”

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