Pound Rises as Fed Expectations Calm Brexit fears
European stocks rose on Wednesday after data reveal expectations of dovish words from the US calmed investors on whether Britain will vote to leave the European Union.
The pound gained against the yen and dollar as investors rescind their demands for safe-haven assets ahead of Fed’s meeting.
Recently opinion polls have put the “Leave” campaign ahead, though bookmakers’ odds still favour a vote to remain.
But with the Fed seen certain to leave interest rates unchanged later in the day and markets giving no more than a 15 percent chance of a hike this year, investors on Wednesday showed a greater appetite for risk, with the yen and the Swiss franc taking a back seat.
“Janet Yellen has been the fairy godmother of the bull market on a number of occasions,” said Teis Knuthsen, chief investment officer at Saxo Bank A/S’s private-banking unit in Hellerup, Denmark. “I’m looking for her to repeat that performance.” Still, fears about Brexit “have finally spread beyond currencies and put a lot of pressure on all asset classes lately,” he said.
The pound strengthened 0.3 percent to $1.4176, having hit a two-month low of $1.4091 on Tuesday. The sterling also rose half a percent to 150.53 yen.
The dollar climbed 0.2 percent to 106.33 against the yen, having fallen as far as 105.63 yen on Tuesday. The euro was flat at $1.1215 but jumped 0.3 percent against the Swiss franc to 1.0829 francs.
NASENI Solar Cell Factory to be A Game Changer in Nigeria’s Energy Sector
The National Agency for Science and Engineering Infrastructure (NASENI) which recently laid the foundation for its solar cell production factory in Gora, Nasarawa state Nigeria, has positioned to be a game changer in the nation’s energy sector.
The Executive Vice-chairman and Chief Executive of NASENI during the foundation laying ceremony Prof. Mohammad Sani Haruna disclosed that the agency has embarked on a $325,860,690 solar cells production plant to make power affordable.
He stated that the agency’s goal was to use science, innovation, and technology, to advance local contends interventions in power sector reforms.
In his words, “The cost of solar energy is still beyond the affordability of an average Nigerian hence the necessity of this project. When fully commissioned, the price per watt of solar power supply will be cheap enough to be affordable to everyone and it is a game changer in the energy and power supply industry as well as industrial development in Nigeria. This singular project has the capacity to positively change the energy status of Nigeria, the region, and the continent of Africa since it is the first of its type”.
Also present at the foundation laying ceremony, Nigeria’s Vice President Prof. Yemi Osinbajo disclosed that the solar cell production factory will lead to solar manufacturing in the country. He was also positive that the NASENI solar cell production plant will meet and surpass expectations when it becomes fully operational.
In his words,
“This landmark achievement places Nigeria within the ranks of countries pushing the boundaries in the use of climate-smart energy sources, particularly solar power. And as we have heard, this particular project is built on 10 years of work. 10 years ago, NASENI established its 7.5mw solar panel production plant. Its capacity is now 21MW. NASENI solar cell production factory in Nigeria will be a game changer, given the urgency of climate action today and the importance of developing African green energy manufacturing and solutions”.
The National Agency for Science and Engineering Infrastructure (NASENI) last year stated that it received a directive from President Muhammadu Buhari to produce more solar cells to boost Nigeria’s alternative power sources.
Investors King understands that for over 10 years, NASENI has been consistent in championing solar power as an alternative to hydro and fossil power. The agency’s target is to contribute 50 megawatts of solar energy to Nigeria’s electricity by 2023. The agency has already achieved about 21 Megawatts per annum with installed capacity through its NASENI Solar Energy Limited, a manufacturing plant located in Karshi, Abuja.
In Nigeria, the rapid population increase and the overreliance on fossil fuel have no doubt created significant environmental, health, and economic consequences which have led to severe socio-economic drawbacks.
Also, the energy deficit has led to poverty, economic decline, hardship, and several negative impacts. That is to say that a constant and stable energy supply is fundamental to the development of the country. With the commencement of the NASENI solar cell production plant and the agency’s commitment to enhance Nigeria’s energy sector, it is not far-fetched to say that the nation will record several remarkable achievements as a result of improved energy supply.
A Dovish Shift From the Fed
By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
Equity markets in Europe opened a little lower on Thursday following a very mixed session in Asia and some heavy selling on the other side of the pond on Wednesday.
While investors have been relieved that this week has brought no new instability in the banking sector (yet), they are a little concerned by what they heard from the Fed and Treasury Secretary Janet Yellen yesterday.
The central bank hiked interest rates by 25 basis points, in line with expectations, but the language that accompanied it was far less hawkish than before, reflecting the uncertainty that the recent mini-banking crisis has created.
Jerome Powell and his colleagues are clearly concerned about the impact of recent events on credit conditions which may impact lending to households and businesses, slow the economy, and weigh on inflation. While this would do some of its job for it, in bringing inflation back to target, it won’t do so in the way that it will have wanted.
What’s more, the risks of further fallout have left investors nervous and while the Fed is not pricing in any rate cuts this year, markets very much are. We may not see those risks reflected in Fed forecasts and the dot plot but they are evident in the language used, as they were with the ECB last week.
BoE left with little wiggle room
The Bank of England is up next and it also finds itself left with little option but to raise rates again despite the events of the last couple of weeks. Regardless of yesterday’s inflation data, the MPC may have opted for another 25 basis points anyway as its counterparts in the US and euro area have stuck to their plan without any negative repercussions.
But the February CPI readings removed any flexibility they may have thought they had and now markets are pricing in a higher terminal rate of around 4.5% as a result. This makes the language that accompanies the decision key and I expect it will use the same playbook as the Fed and ECB in highlighting the uncertainty around the outlook and the need to take it one meeting at a time and be data-dependent.
Signs of permanent damage in oil?
Oil prices are a little lower today after gradually recovering in recent days. While no one can say with confidence that a banking crisis has been averted, there is growing confidence that the actions taken by central banks, regulators, and governments have significantly reduced the odds of one, particularly a severe scenario, and that is ultimately good for the economy and crude demand.
So while we saw Brent and WTI plunge to late-2021 levels amid the panic of the various collapses, they have bounced back almost 10% in recent days. That said, they remain below the range lows that preceded the sell-off and have even run into resistance around those lows over the last couple of days. A move back above here may suggest confidence is returning while a failure to do so may indicate some more permanent damage to expectations.
Gold shining once more?
Gold has been buoyed by the less hawkish stance from the Fed and the market perception that the central bank will swiftly reverse course on interest rates. While Powell pushed back against this, markets have other ideas and that’s enabled the dollar to soften, yields to pull back, and gold to rally.
Throw in some risk-aversion on the back of Yellen’s comments on the government not considering blanket insurance for bank deposits and gold is beginning to shine once more. It now has $2,000 in its sights once more – a level it has rarely ever traded above – and record highs are not that far above either. This could potentially become a very favourable environment for the yellow metal.
Oil Prices Slide on Soft Demand and Pending Fed Interest Rate Decision
Oil prices saw a slight decrease on Wednesday following indications of weak demand and the anticipation of a crucial interest rate decision by the U.S. Federal Reserve.
Brent crude oil, which had risen almost 3% earlier in the week, fell by 0.40% to $75.02 a barrel, while U.S. West Texas Intermediate (WTI) crude oil was down 0.42% at $69.38.
Data from the American Petroleum Institute released on Tuesday put the demand for oil into question after revealing an unexpected increase in U.S. crude inventories, contradicting analyst predictions of a decline.
Oil prices were also impacted by an unexpected rise in UK inflation in February, raising concerns of more interest rate hikes a day before the Bank of England’s latest interest rate decision.
The global market is waiting to assess the decision of the U.S. Federal Open Market Committee (FOMC) on interest rates later today to decipher the future direction of price action.
While the expected 25 basis point rate hike was a turnaround from the previously anticipated 50 basis point rate rise, analysts predict that it won’t have a significant impact on oil prices.
Craig Erlam, senior market analyst at OANDA, said, “It would be a big shock if the Fed reverted back to larger rate hikes now considering everything that’s happened this past couple of weeks.”
Last week, Brent prices hit their lowest levels since 2021 on concerns that the drop in bank shares could lead to a global recession and reduced fuel demand.
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