Forex

Pound Traders Brace for Months of Swings as EU Vote Called

Published

8 years ago

February 21, 2016

Pound traders are expecting little respite from the currency’s volatility after U.K. Prime Minister David Cameron called a referendum on the nation’s European Union membership for June 23.

The pound jumped the most in more than two weeks against the dollar after Cameron finalized a deal with EU leaders on Britain’s relationship with the rest of the 28-nation bloc in the closing hours of trading in New York on Friday. Still, a measure of traders’ expectations for price swings in the pound against the euro during the next six months remained at the highest since 2011. The deal Cameron secured means he is recommending the U.K. should stay in the EU, he said on Saturday.

Although the announcement of the date removes one aspect of ambiguity for traders, they now face months of polls and campaigning that could boost volatility further. With traders already pushing back bets on the timing of a Bank of England interest-rate increase, the prospect of Britain leaving the world’s largest single market had been causing further concern, helping push down the pound against most of its Group-of-10 peers this year.

“The pound’s weakness is a product of uncertainty of the U.K.’s ongoing membership of the union, not the timing of the poll,” said David Page, a senior economist at AXA Investment Managers in London. “Weakness is likely to reflect any increased perception of the likelihood to leave and as such is likely to be a constant feature over the coming months.”

The pound climbed 0.5 percent to $1.4406 as of 5 p.m. New York time on Friday. While the currency is down 2.2 percent this year, it has rebounded from an almost seven-year low of $1.4080 reached in January.

“The pound is likely to bounce near term” as investors see the deal “as increasing the prospects of Britain voting to stay in,” said Mansoor Mohi-uddin, senior markets strategist in Singapore at Royal Bank of Scotland Group Plc. Still, “as we get closer towards June 23, investors are likely to become increasingly nervous,” he said.

Higher Volatility

Sterling added 0.2 percent to 77.29 pence per euro on Friday, paring its drop this year to 4.6 percent. Six-month implied volatility for the pound versus the euro, a measure of price swings based on options, was at 12.10 percent, the highest level since September 2011, based on closing prices.

The uncertainty over the vote hasn’t had the same impact on equities. While U.K. stock swings have increased this year, FTSE 100 Index implied volatility remains lower than for the euro area. And the weakening of the pound has actually helped the gaugeperform better than any other major market in the region. Even small- and mid-cap companies, deemed more at risk in a “Brexit” scenario, have fallen less than their European peers. Pictet Asset Management says U.K. stocks are not reflecting the true danger of an exit.

Goldman Sachs Group Inc. said earlier this month that if Britain quits the EU sterling could fall to $1.15-$1.20 — levels last since in 1985. HSBC Holdings Plc said in January that a forecast for a jump to $1.60 by year-end relied on the nation remaining in the 28-member club.

“The uncertainty will persist” into the vote, said Kit Juckes, a global strategist at Societe Generale SA in London. “Sterling was the weakest major last week and probably remains under pressure.”

Ministers’ Stance

Traders’ attention may now turn to the stance of ministers who, while given a free hand by Cameron to campaign against the government’s position, were asked not to announce their intentions until after the cabinet meeting.

Cameron was given a fillip on Saturday when Business Secretary Sajid Javid and Home Secretary Theresa May, both seen as wavering over which way to vote, threw their support behind the campaign to remain. Six ministers, including Justice Secretary Michael Gove, were later pictured at the headquarters of one of several groups campaigning to leave the EU.

The support of London Mayor Boris Johnson for either side may prove key to sterling, given his popularity with the British public, according Morgan Stanley. Should he choose to publicly back the exit campaign, “the pound should come under immediate pressure,” analysts led by Hans Redeker wrote in an e-mailed report Friday.

Eshe Nelson/Bloomberg

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Naira

Dollar to Naira Black Market Today, April 19th, 2024

As of April 19th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,100 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

9 hours ago

April 19, 2024

Samed Olukoya

As of April 19th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,100 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,020 and sell it at N1,010 on Thursday, April 18th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate declined slightly when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.

Black Market Dollar to Naira Exchange Rate

Buying Rate: N1,100
Selling Rate: N1,090

Naira

Naira’s Recent Gain Reflects Policy Direction, Says CBN Chief Olayemi Cardoso

Published

1 day ago

April 18, 2024

Samed Olukoya

Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN), has explained that the recent surge in the Naira is a testament to the positive direction of government policies rather than active intervention to defend the currency’s value.

Addressing attendees at the spring meetings of the International Monetary Fund and World Bank in Washington, Governor Cardoso underscored that the CBN’s intention is not to artificially prop up the Naira.

He clarified that the fluctuations observed in the country’s foreign exchange reserves were not aimed at defending the currency but rather aligning with broader economic goals.

Over the past month, the Naira has experienced a notable uptick in value against the dollar, signaling a reversal from previous declines. Data from Bloomberg reveals a 6.4% decrease in liquid reserves since March 18, coinciding with the Naira’s rebound.

Despite this decline, Cardoso pointed out that around $600 million had flowed into the reserves in the past two days, reflecting confidence in the Nigerian market.

Governor Cardoso articulated the CBN’s vision of a market-driven exchange rate system, emphasizing the importance of allowing market forces to determine exchange rates through willing buyers and sellers.

He expressed optimism about a future where the central bank’s intervention in the foreign exchange market would be minimal, except in extraordinary circumstances.

The recent resilience of the Naira follows a period of volatility earlier in the year, marked by a substantial devaluation in January. Since then, the CBN has implemented measures to stabilize the currency, including monetary tightening and initiatives to enhance dollar liquidity.

Cardoso highlighted the transformation in market sentiment, noting that investors now perceive Nigeria’s central bank as committed to stabilizing inflation and fostering economic stability.

As Nigeria continues its journey toward economic recovery and stability, Cardoso’s remarks provide insight into the central bank’s strategy and its impact on the country’s currency dynamics.

Naira

Dollar to Naira Black Market Today, April 18th, 2024

As of April 18th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,020 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

1 day ago

April 18, 2024

Samed Olukoya

As of April 18th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,020 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,050 and sell it at N1,040 on Wednesday, April 17th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate improved when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.