The Nigerian currency maintained its relatively stable run against the British currency on the Nigerian foreign exchange market, amid a rebound in the British pound sterling in the global foreign exchange market.
Market action shows that GBP/NGN spot has stayed within a stable band: CBN’s latest data showed it settled at N1,850/£1
The Naira’s best form against the Cable this year was when it reached a spot market peak of roughly N1,814/£1 to the British pound, strengthening to its highest valuation of the year on April 16.
The naira posted a strong showing in the medium term. The naira has strengthened about 6.6% against Sterling this year, having opened at N1,948.9/£1.
Latest market action showed the Nigerian currency also traded in a N1,350/$ to N1,370/$ range in the official window (NFEM) deals.
However, the British pound was sold at about N1,900£1 to buy and N1,925/£1 to sell at the unofficial market, showing that demand for foreign currencies by importers and travelers is high in the economy.
Local market operators revealed that the pound is a high-demand foreign currency in Nigeria, with people paying a high premium for school fees abroad, medical treatments, offshore business transactions, and travel abroad.
The Nigerian Apex Bank has continued with a strong wave of intervention and tight monetary policy, with the apex MPR sitting firmly at 26.5 percent.
The Central Bank’s successful liquidation of FX backlog debts brought in international portfolio investors to Nigerian debt instruments, ensuring a constant FX supply.
Increased crude oil production and a solid rise in energy prices during the first half of the year have bolstered Nigeria’s gross foreign reserves, while solid remittance flows from Nigerians abroad have continued to provide ample hard currency supply.
British pound sterling holds the U.S dollar at $1.34
The UK Sterling is caught in an interesting fight with the dollar, currently trading around 1.34. This story involves both huge “Central Bank Week” positioning and the biggest geopolitical news we’ve had to contend with lately.
The dominant theme the market is playing is the tug-of-war between a geopolitical rally and a prudent monetary policy stance. Sterling traded with significant ‘risk-on’ strength as it rose toward 1.3450 early in the week.
This followed a significant development regarding a US-Iran ceasefire deal and a reopening of the Strait of Hormuz, which sent crude prices into free fall.
- This removed the rug from beneath the dollar’s feet given that the dollar is the risk-off asset of choice, temporarily sending it lower. The relief rally, however, completely unwound when attention went back to macro policy.
The showdown between the central banks: traders are sitting on their hands with big central bank meetings looming on Wednesday and Thursday. - The dollar is seeing modest strength as traders begin to brace themselves for the Wednesday meeting, where we could see the tone shift significantly.
The BoE is set to meet the day after. Before the meeting, we get the UK’s latest CPI release on Wednesday.
- Weakness in US manufacturing and regional manufacturing indices usually spells weakness for the Dollar, but we see some strengthening here ahead of the Fed meeting. Markets also see that UK growth is scrutinized, with fears of contraction lurking in the market.
- Cable has mounted a good recovery from the May lows, but it has run into a wall of resistance and structure. We see a slightly bearish to neutral posture on the daily chart if the exchange rate is located under its longer-term moving averages. Major Resistance remains at the 1.3500 psychological level, the May 26 high.
A consolidation range around this level can be expected. The Relative Strength Index (RSI) is hovering quietly near 48 to 53; this reflects the market sentiment waiting and consolidating in anticipation of the massive fundamental drivers due to be released this week.
