Goldman Sachs Group Inc. Raised its Forecasts For The Euro
Goldman Sachs Group Inc. raised its forecasts for the euro after its call that the European Central Bank would send the shared currency tumbling as much as 3 percent with dovish easing policies crumbled last week.
The euro instead climbed more than 3 percent in the wake of the ECB’s Dec. 3 meeting, after President Mario Draghi’s package of measures underwhelmed some investors. The decision marked a shift in the central bank’s behavior for Goldman’s chief currency strategist Robin Brooks, who says he is losing faith that officials are “wholeheartedly” pursing reflationary policies.
Brooks forecasts the euro will weaken to $1.07, $1.05 and $1.00 in three, six and 12 months respectively. This compares to previous forecasts of $1.02, $1 and 95 cents. At end of 2017 the euro will be at 90 cents versus a previous forecast of 80 cents, he said.
“Although we are reluctant to do this, given our view of euro-zone fundamentals (a large output gap and low underlying inflation), we have to acknowledge the apparent disagreement on the Governing Council over the need for additional easing,” Brooks wrote in a note to clients. “There is no doubt in our minds that euro down will again become a theme over time, but regrettably that time is not now.”
The euro weakened 0.7 percent to $1.0810 as of 10:40 a.m. London time, extending a decline from Friday. On the day of the ECB meeting it jumped 3.1 percent, the biggest advance since 2009.
Goldman also raised forecasts for the euro against the pound and Swiss franc, to reflect new expectations that declines will be smaller. In six months the euro will be at 70 pence, compared with a previous forecast of 67 pence.
The ECB’s easing measures, which included a cut to the deposit rate and a six-month extension to the bond-buying program, didn’t meet expectations for aggressive stimulus, which were stoked by Draghi on Nov. 20 when he said policy makers “will do what we must to raise inflation as quickly as possible.” This sense of urgency was missing, Brooks said.
Nigeria Raises Interest Rate by 50 Basis Points to 18%
The Central Bank of Nigeria (CBN) led monetary policy committee has raised the nation’s borrowing cost by another 50 basis points following a 500 basis points increase in 2022 to 18%.
The committee attributed its decision to the rising inflation rate and the need to contain price development around expectations of subsidy removal and other energy sources.
“These in the view of members, provides a compelling argument for an upward adjustment of the policy rate, albeit, less aggressively. The Committee, however, noted that the naira redesign and cash withdrawal limit policies have resulted in a sizeable reduction in Currency-Outside-Banks, indicating an expected improvement in the potency of monetary policy tools,” the minutes stated.
Another factor considered was the drop in capital importation and the impact of exchange rate pressure on domestic price levels.
The committee, therefore, called for policies to attract both portfolio and foreign direct investment to Nigeria.
It maintained optimism that, the continued progress made with the RT200 FX programme, Naira-4-dollar and
other policies targeted at attracting diaspora remittances, would continue to help improve accretion to the external reserves and improve liquidity in the foreign exchange market.
Members, however, remained aware of the ongoing challenges associated with the limits imposed on cash withdrawals in the face of frequent downtime in bank electronic transaction channels. The Committee thus called on Other Depository Corporations, online payment platforms, and other stakeholders to ensure that the prevailing incidence of network failures is overcome in the immediate and short term.
This would ensure that the Naira Redesign and Cash Withdrawal Limit Policies lead to an improved in-road of the CBN Cashless program and efficiency of the transmission mechanism of monetary policy.
Members, therefore, agreed to raise Monetary Policy Rate by 50 basis points, with ten members voting to raise the MPR by 50 basis points while one member voted to raise the MPR by 25 basis points and one member voted to hold the MPR. All members voted to keep all other parameters constant.
CBN Will Make More Redesigned Currency Available, Resolve Failed Bank e-Transactions– Emefiele
The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele has said that about N1 trillion is currently in circulation and more redesigned naira notes will be made available to the citizens.
This is as he apologised for the increase in failed digital bank transactions, promising that the online payment system hitches will be resolved soon.
The CBN governor spoke on Tuesday at the close of the two-day monetary policy committee meeting held in Abuja.
Investors King reports that Nigerians have been faced with cash scarcity since January, 2023 and recently, rise in failed electronic bank transactions done through bank mobile apps, debit cards and USSD channels making payment more difficult.
Emefiele assured that the CBN payments system management department are working on it to ensure that the situation is improved and electronic banking channels are resolved on time.
He commended the fintechs for complementing payment channels to reduce the workload on traditional banks in Nigeria.
His words, “I must apologise. Yes, online channels fail. But no doubt it is as a result of the deluge of online transactions that hit the banking industry. But it is being resolved,” Emefiele said.
“On a daily basis, our payments system management department monitors the online payment platforms so as to make sure that when there is a downtime, they are quickly resolved so that transactions can go on smoothly.”
According to the CBN Boss, the apex bank is working to ensure that more redesigned notes are circulated but are not kept outside the bank as the redesign policy aims to checkmate storing money in other places.
He gave the details of the redesigned naira notes pumped into circulation at the beginning of the policy as N3.23 trillion, of which only N500 billion was kept in bank accounts while N2.73 trillion was stored outside the banks.
“It was published yesterday that currency in circulation is close to N1 trillion. CBN will continue to pump the newly redesigned currency into the market.
“The truth is that at some point we will need to reassess to know whether the currency in circulation has attained an optimal level so as to put in place measures to ensure that we don’t go to the level where we were when people kept money outside the banking system for their own benefits,” he added.
Nigeria Labour Congress Calls for Nationwide Strike and Picketing of Central Bank of Nigeria Branches
The President of the Nigeria Labour Congress, Joe Ajaero, has directed public sector workers in the country to commence a nationwide strike from Wednesday next week.
He also ordered affiliate unions of the Nigeria Labour Congress to be on standby for picketing exercises across all branches of the Central Bank of Nigeria (CBN) nationwide.
This directive was issued following an earlier ultimatum by the Central Working Committee members of the NLC last week, criticising the cash swap policy of the Federal Government. Ajaero expressed disappointment that the Federal Government and the CBN had not shown any commitment to address the situation.
The NLC President lamented that despite the Supreme Court order allowing the old N500 and N1000 notes to circulate with the new notes until December 31 this year, the situation appears to be getting worse as workers cannot access cash to pay fares to work, nor can they buy food for their families.
At a press briefing on Wednesday at the headquarters of NLC, the apex labour union also criticised the pricing irregularities in the petroleum sector, which they claimed was another cause for concern.
“Last week, we gave an ultimatum for the review of the cash crunch bedeviling the country, but we have discovered to our dismay that as at this moment not much effort has been made to ameliorate the situation. The government is still foot-dragging on these issues we raised,” said Ajaero.
“Based on this, we met again this morning to review our position and resolved that by Wednesday next week, all CBN branches will be picketed. Workers are directed to stay at home too because people cannot eat, workers can no longer go to the office. We have been pushed to the wall, we have decided to take our destiny in our hands, we have mobilised our workers for this exercise,” Ajaero added.
This development is likely to have significant economic implications, as the CBN plays a crucial role in the management of Nigeria’s monetary policy. It remains to be seen how the Federal Government and the CBN will respond to the NLC’s demands, and whether a resolution can be reached before the scheduled strike action.
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