The British Pound exchanged hands at N1,834 against the Nigerian Naira in Nigeria’s foreign exchange market at the start of Friday’s trade session. The pair traded between N1,813/£1 and N1,862/£1 this month, signaling continued short-term volatility around the N1,830/£1 area as an anchor.
Persistent Nigerian FX Demand for Pounds has remained high amid increased medical tourism to London and school fees payments in British schools. The Nigerian Central Bank has kept its benchmark rates elevated in a bid to clamp down on domestic price pressures.
Increased buyer sentiment and push above N1,840/£1may fuel buying pressure higher up to resistance toward the previous monthly high close at N1,850/£1
Market action shows currency traders will pay close attention to any month-end FX liquidity coming from authorised dealers and BDCS, as well as month-end FX offer spikes often observed before month-end for settlements and payments from some of the biggest companies that deal with foreign exchange transactions.
However, inflationary pressures in Nigeria are higher compared to the UK inflation rate, thereby offering a baseline for Naira’s depreciation. There is also regular sale of FX to Bureau De Change (BDC) operators and dealers at the authorized window to counter any sudden jumps.
Latest fundamentals showed an increase in Nigerian reserves has allowed the CBN to offset some of the extreme volatility.
British pound loses some ground against American dollar
The British pound sterling continues trading in the red around the 1.3445 mark in early European trading on Friday. Rising global crude oil prices along with escalating tensions in the Middle East are offering the safe-haven Dollar some cushion against Sterling.
The Bank of England remains prudent over the timing of any interest rate cuts, making London-denominated yields comparatively attractive against most major globally benchmarked currencies, thus providing support for the British pound across the major markets.
Iran’s Parliament Speaker Mohammad Bagher Ghalibaf on Thursday strongly condemned the U.S. Strike on the residential areas on the Qeshm Island, saying it proves the continuation of American criminal activities on the southern Iranian towns of Minab and Lamerd.
The US Forces conducted a series of missile strikes on southern Iran’s sites, including the Qeshm Island and areas of Bushehr, Fars and Khuzestan provinces.
Markets have priced a more than 90% possibility of a rate to hold, and only a slight probability of a hike. It is pricing a rate hike at 4% at year-end. The BoE is expected to hold steady with less worrying UK inflation.
Financial markets believe that the Bank of England (BoE) is expected to keep the policy rate at 3.75% for a fifth straight meeting and also argue that the less worrisome UK inflation backdrop gives the BoE room to stand pat, as lower headline inflation will allow officials to hold steady rather than being pressured to hike interest rates.
The US data showed economic growth was softening and inflation easing, trimming expectations of an imminent Federal Reserve (Fed) hike, which helped the overnight fall in the greenback.
The Federal Reserve kept its target range of 3.50%-3.75% bands on an 8-1 vote, though three committee members voted for an immediate quarter-point increase.
Sterling read this as a refund rather than a penalty and saw prices spike to approximately 40-odd pips to the better of the 1.3350 region within minutes of the announcement. Futures had priced in more than one third of a hike going into this decision.
In addition, US economic growth slowed to a 1.5% annual rate in the 2nd quarter; this was lower than the 2.1% of the preceding period and below expectations.
Likewise, the US headline Personal Consumption Expenditures (PCE) Index posted a 0.1% decline in June on a month-on-month basis, marking the first month-on-month fall for price inflation in the US since the April 2020 period, as the Iran war respite sent crude oil prices lower.
