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Pound Jumps Most This Year as Polls Shows Brexit Risks Receding

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Bundles of Euro Currency and Sterling Notes

The pound jumped amid evidence the campaign to keep Britain inside the European Union is extending its lead.

Sterling climbed the most this year versus the euro, touching a more than two-month high, and rallied against the dollar as an opinion poll by the Evening Standard newspaper and Ipsos Mori put the “Remain” camp’s lead at 18 percentage points. That’s after an ORB/Telegraph survey earlier this week showed 55 percent of respondents in favor of staying in the EU versus 40 percent wanting to leave.

Britain’s currency has acted as a barometer of sentiment in the run-up to the June 23 referendum, sliding to a seven-year low versus the dollar about a week after the date of the vote was announced in February. It’s now gaining as surveys support optimism that a Brexit — which both the government and the Bank of England have said will hurt the economy — can be avoided.

“Market participants are trading on the headlines and seeing the remain camp ahead and therefore buying the pound,” said Thu Lan Nguyen, a currency strategist at Commerzbank AG in Frankfurt. “The market’s getting more sensitive to the polls as we get closer to the referendum.”

Other surveys have also shown the pro-Europeans seizing the advantage. A poll by YouGov Plc and the Times on Wednesday put the pro-EU camp at 44 percent versus 40 percent for those favoring quitting the world’s largest single market.

Pound Rallies

The pound climbed 1.2 percent to 77.28 pence per euro as of 2:33 p.m. London time, touching the strongest level since March 10. It also rose the most in a month versus the dollar, advancing 0.8 percent to $1.4585 and reversing a drop of as much as 0.4 percent.

The U.K. currency slipped earlier as the nation’s jobs market showed signs of cooling. Coming after a report Tuesday that showed an unexpected drop in the inflation rate, slowing wage growth underscored how the economy is struggling as the EU vote approaches.

“If we vote for leave, it will be a pretty precipitous decline of sterling,” Allianz Global Investors Global Chief Investment Officer Andreas Utermann said in an interview on Bloomberg Television. “The negative implications of an out vote could be very serious.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Forex

Again CBN Devalues Naira by N6 Ahead of World Bank’s $1.5bn Loan Request

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Naira Dollar Exchange Rate

The Central Bank of Nigeria (CBN) has once again devalued the Nigerian Naira by N6 to the United States Dollar, making it the third time the apex bank will adjust the Naira exchange rate this year.

The devaluation brings the CBN closer to actualising foreign exchange unification demanded by the International Monetary Fund (IMF) in April before the $3.4 billion loan was approved.

This same condition was enforced by the World Bank as a prerequisite for approval of $1.5 billion loan request submitted by the Federal Government. The loan the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said she was positive it would be approved by the multilateral institution in the next meeting given that the Federal Government has met all the conditions for the said loan.

24 hours later, the apex bank devalued the Naira official rate by N6 from N379/US$ to N385/US$. While the International Money Transfer Service Operators (IMTOs), all authorised dealers, bureau de change operators and service providers were asked to add N6 across all rates.

The rate for IMTOs against the US dollar has now moved from N382 to N388. Meaning banks will now sell dollar to the CBN at N389, up from the previous N383 to us dollar.

Again, the Central Bank sale of dollar to the bureau de change operators was pegged at N390 to dollar, against the old N384 to US dollar.

The apex bank, therefore, directed the BDCs to sell at not more than N392 per dollar to end-users. The old rate was N386 to a US dollar.

The CBN circlar reads in part, “Weekly Exchange Rate For Disbursement of Proceeds of International Money Transfer Service Operators’ pegged IMTOs sale of dollar to banks at N388 to dollar; banks sale of dollar to CBN at N389 to dollar and CBN sale of dollar to BDCs at N390 to dollar. The BDCs are now expected to sale to end-users at not more than N392 to dollar and each BDC is entitled to buy $10,000 weekly”.

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Forex

More Problem for CBN as Naira Approaches N500/US$ at the Black Market

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Forex Weekly Outlook March 6 - 10

Naira plunged against the United States Dollar to a record low of N495 at the black market on Thursday despite the Central Bank of Nigeria saying it has enough financial means to meet forex demands.

The Naira declined by N12 from N483 it exchanged on Monday amid persistent scarcity and high demands by importers and businesses looking to offset COVID-19 losses with the usual December high demand sales.

Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN), on Tuesday blamed the wide foreign exchange rate at the black market on speculators and hoarders looking for personal gain at the expense of the nation.

He went on to caution experts using black market rates to analyse the local currency performance to stop and claimed that section of the forex only accounts for 5 percent of the nation’s total foreign exchange transactions.

While that might be true, it is also true that majority of manufacturers and businesses have turned to the black market for their forex needs in recent months, especially after it became obvious that the apex bank does not have enough liquidity to service the economy.

The nation’s foreign reserves has been battered by the weak oil prices and the continuous production cut by OPEC and allies to artificially support low prices. Nigeria’s foreign reserves is presently hovering between $35 billion and $36 billion after plunging from $45 billion attained in June 2019, according to the latest data from the Central Bank of Nigeria.

Against the British Pound, the Nigerian Naira depreciated by N15 to N635 from N620 it exchanged on Monday. Another indication of chronic forex scarcity as the local currency also plunged to N580 against the European common currency, the Euro.

The wide forex is expected to further weigh on the nation’s inflation rate and consumer spending this December.

On Tuesday, the apex bank left the interest rate unchanged at 11.5 percent and attributed the rising inflation rate to structural policies, the recent #EndSARS protest and a surging fuel price.

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Forex

Naira Gains N1 to N483 Against US Dollar as CBN Warned Speculators of Impending Doom

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Naira Remains under pressure

The Central Bank of Nigeria on Tuesday warned speculators and hoarders of the United States Dollar against creating artificial forex scarcity for personal gain.

Godwin Emefiele, the Governor of the Central Bank of Nigeria, said black market forex rates does not reflect the economic reality of the Nigerian Naira as that section of the forex is tainted with bribes and individuals looking to profit at the expense of the nation.

We do not agree that the determining factor for our currency should be based on a market that is tainted, where people go to offer bribes,” he stated during a virtual monetary policy committee briefing in Abuja.

The Nigerian Naira gained N1 against the United States dollar to trade at N483 at the parallel market also known as the black market, up from N484 it traded on Monday.

Emefiele said “The black market is illegal where people do not provide documentation to support transactions. It is unfortunate and unfair for analysts to say Nigeria’s exchange rate is at 480 per dollar.”

The Association of Bureau De Change Operators of Nigeria (ABCON) agreed with the central bank, saying speculators and currency hoarders are responsible for the wide forex rates. The association warned that speculators are going to lose money given that the apex bank has foreign reserves of $36 billion to support the local currency and meet forex demands.

The apex bank left the interest rate unchanged at 11.5 percent to further stimulate growth in the real sector and speed up the recovery process with cheaper loans. Other ratios were left unchanged as well.

Speaking on the rising inflation rate, Godwin Emefiele attributed the 14.23 percent increase in consumer prices to the rising pump price, the recent #EndSARS protest and structural policies.

Therefore, it looks like the apex bank will damn rising inflation for the first time to focus on economic productivity, new job creation and general growth.

The Naira CBN official rate remains $379 to a United States Dollar while it exchanged at N385 on the Investors and Exporters Forex Window on Tuesday.

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