Connect with us

Forex

Pound Traders Brace for Months of Swings as EU Vote Called

Published

on

Barclays UK

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.

/Bloomberg

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

Continue Reading
Comments

Naira

Naira Black Market Exchange Rate Hits N745 Against U.S. Dollar

Published

on

Naira Dollar Exchange Rate - Investors King

Naira black market – The Naira to Dollar exchange rate improved to N745 on Friday, 9th December 2022 at the nation’s black market, up from the N750 it exchanged on Thursday. This represents an improvement of 0.67%

At the official forex section, the Investors and Exporters forex window, the Naira depreciated slightly against the U.S. Dollar to N446 on Thursday from N445.83 recorded in the previous day.

Currency traders in that section of forex transacted $213.2 million on Thursday, the highest turnover in almost a month.

Accordingly, at the Central Bank of Nigeria (CBN) interbank forex section, Dollar was sold to financial institutions at N445.47 since  Wednesday while Pounds Sterling and Euro common currency were exchanged at 541.157 and N467.4317, respectively.

The Nigerian Naira remained under pressure against its global counterparts as market uncertainty ahead of the 2023 general election and a series of policy changes continue to dictate the local currency value.

Meanwhile, the CBN has announced yet another policy change on cash withdrawal. Investors King reports that Nigerians can no longer withdraw more than N20,000 per day and N100,000 per week.

Responding to questions from the press during his visit to President Buhari in Daura, Katsina State, Mr Emefiele said the policy would not be reversed despite outcry but would be reviewed from time to time.

“I am aware that they (federal lawmakers) have asked for some briefings and we will brief them. But I think it’s important for me to say that the cashless policy started in 2012,” he said when asked about the House’s decision.

“But on almost three to four occasions we had to step down the policy because we felt that there is a need for us to prepare ourselves and deepen our payment system infrastructure in Nigeria.

“Between 2012 and now 2022, almost 10 years, we believe that a lot of electronic channels have been put in place that will aid people in conducting banking and financial service transactions in Nigeria,” he said.

 

Continue Reading

Forex

Akinwumi Adesina Extols Africans in Diaspora on Cross-Border Remittance

Published

on

Akinwunmi Adesina - Investors King

African Development Bank (AfDB) President, Akinwumi Adeshina has extolled the tenacity and impacts of Africans in Diaspora on cross-border remittance.

According to the AfDB President, Africans in the diaspora are the continent’s largest financiers through their yearly remittances.

Speaking at an event organised by the Bank in collaboration with the African Union Commission, Adeshina noted that cross-border remittance into Africa is more than development assistance to the continent. 

Investors King earlier reported that remittance into Nigeria and other countries in the sub-Sahara Africa region hits $53 billion in 2022.

The AfDB President said, “The value of remittances from the African diaspora doubled from $37 billion in 2010 to $87 billion in 2019, reaching $95.6 billion by 2021. Yet official development assistance to Africa in 2021 was $35 billion, or 36% of the remittances from the diaspora”.

Adeshina added that Egypt and Nigeria are among the top-ten remittance recipients globally, with $31.5 billion and $19.2 billion, respectively in 2021. 

While speaking on the advantage of cross-border remittance to the African continent, the AfDB president noted that remittances have helped to meet financial, food, education, and health needs of many Africans, “it as well as serve as countercyclical sources of finance,” he said.

“The African diaspora has become the largest financier in Africa! And it is not debt, it is 100% gifts or grants, a new form of concessional financing that is the key for livelihood and security for millions of Africans” he added.

Similarly, Adeshina further positioned the need to eliminate premium charges on cross-border remittance into Africa. He noted that cross-border into Africa is twice what is it for South Asia.

He concluded that the Africans in diaspora can add more than remittance and investment, noting that they have skills, knowledge and know-how which can be needed for the development of the continent.

“They can help build world-class universities, and they can be mentors for the new generation of Africans,” he said. 

Continue Reading

eNaira

E-Naira Transaction Volume Rises to N5 Billion in November Amid Intensified Campaign

More Nigerians embrace eNaira wallet as CBN takes adoption campaign across the nation

Published

on

enaira

The Central Bank of Nigeria, (CBN) has disclosed that e-Naira transaction volume rose to a record N5 billion in the month of November following a series of campaigns initiated to encourage adoption.

Investors King had earlier reported how the e-Naira adoption team visited a number of parks in Abuja and the University of Lagos among other locations to drive the adoption of the digital currency. 

Speaking at the Second Edition of the Africa Cashless Payment Conference, CBN’s Director of Information and Technology, Hajiya Rakiya Mohammed noted that transaction on the e-naira platform does not attract any charges. 

She stated that Nigeria’s financial ecosystem is large to accommodate everyone.

Hajia Rakiya added that the e-Naira platform can be operated in any of Nigeria’s major local languages, stating that onboarding onto the e-Naira platform is a simple process. 

She further stressed that the primary goal of the e-naira is to reduce the amount of cash in circulation, thereby downsizing the cost of producing paper currency, increase in revenue and direct disbursement to citizens.

Meanwhile, the e-Naira circulation has reached N401.82 million as more Nigerians embraced the digital currency. 

It could be recalled that on October 25, 2021, CBN launched the e-Naira making Nigeria the first African country to have a digital currency. 

During the unveiling of the e-Naira in Abuja, President Muhammadu Buhari stated that the digital naira would increase remittances, foster cross-border trade, improve financial inclusion and enable the government to make welfare payments more easily.

On his part, the CBN Governor, Godwin Emefiele disclosed that the e-Naira offered Nigerians endless possibilities in using financial services. 

While admonishing more Nigerians to embrace the digital naira, Hajia Rakiya noted that “both banked and unbanked can use it, and it can be done through USSD *997#. We have integrated it with telecoms and NIBBS instant payments plus integration with money transfer operations so you can use e-naira for cross border”.

Continue Reading
Advertisement
Advertisement




Advertisement
Advertisement
Advertisement

Trending