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Pound Volatility Gauge Climbs as Traders Brace for BOE Rate Cut

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Sterling has crumbled to a three-decade low against the dollar after the Brexit vote

A measure of overnight potential price swings for the pound against the dollar approached the highest closing level since Britain voted to leave the European Union in June as traders braced for the Bank of England’s policy decision Thursday, which most economists forecast will bring the first interest-rate cut in seven years.

Sterling fell versus all but one of its 16 major peers as swaps pricing showed a 100 percent chance of a rate cut. While all except two of 52 analysts in a Bloomberg survey forecast a reduction, there are a suite of other measures, including an expansion of its bond-purchase program, which the BOE may adopt to tackle a Brexit-induced fallout which are more difficult to predict.

Some economists said they would not rule out the possibility that the BOE will keep its powder dry at this meeting, as it did in July, while awaiting a clearer economic picture.

“There is quite a lot of speculation regarding what the BOE might do today, so the short-term volatility is to be expected,” said Mark Dowding, a London-based partner and money manager at BlueBay Asset Management LLP. “We doubt the BOE would be opposed to the idea of the pound falling further as it would support the growth outlook, which is deteriorating markedly. We see the pound falling to $1.20 or lower by the end of the year.”

Sterling fell 0.3 percent to $1.3287 as of 7:41 a.m. in London. It dropped to a 31-year low of $1.2798 on July 6. The U.K. currency weakened 0.2 percent to 83.85 pence per euro.

Volatility Climbs

Overnight implied volatility for the pound versus the dollar, a measure of anticipated price swings based on options, was at 31 percent, data compiled by Bloomberg show. It touched the highest level on record on June 23, the day of Britain’s EU referendum, and spiked again before the BOE’s July meeting, its first since the historic vote.

The pound has been the biggest loser versus the dollar among major currencies since Britain voted to leave the world’s biggest trading bloc. The Bloomberg Pound Index, which measures the currency against its major peers, has fallen almost 11 percent since the referendum.

Recent economic data suggested Britain’s decision to leave the EU is taking its toll on business confidence and that’s further supported by a report Wednesday that confirmed U.K. services shrank last month at the fastest pace in seven years. Swaps pricing showed a 100 percent chance of a rate cut by the BOE Thursday, compared with about 15 percent before the vote.

“I expect a 25 basis-point rate cut and 100 billion pounds” in QE, said Richard Benson, managing director and co-head of portfolio investment at Millennium Global Investments in London. “However, it is very popular to be fading the BOE and buy the pound. I do not think it’s the correct trade. The post-Brexit depreciation of around 10 percent seems too little to me.”

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.

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Naira

CBN Will Redesign Naira Notes Every Five to Eight Years; Say Emefiele

The central bank will henceforth redesign the nation’s legal tender every five to eight years

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New Naira Notes

Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele has said the bank will henceforth redesign the nation’s legal tender every five to eight years.

The apex bank governor revealed at the unveiling of the new naira notes on Tuesday. 

Godwin Emefiele explained that the naira redesign is in line with global best practice noting that the naira needed to be redesigned and re-issued every five to eight years.

According to the CBN governor, previous administrations lacked the political will to approve the redesign of the naira notes. Stating that it is regrettable that the naira has not been redesigned for the past 19 years. 

“In the past, I have to confess that attempts by the CBN to redesign and re-issue the naira notes have been resisted. It is only President Muhammadu Buhari that has exhibited the courage to do so,” the CBN governor stated. 

Emefiele added that going forward, naira notes will be redesigned at intervals to address some peculiar issues. 

 “After today, the CBN will begin to redesign and reissue the naira every five to eight years,” he said. 

Investors King had earlier reported that President Muhammadu Buhari unveiled the redesigned naira notes at the Federal Executive Council (FEC) meeting today. 

Among those who joined the president with the unveiling include the CBN governor and the EFCC chairman.

Recall, in October, the CBN announced it will redesign the N200, N500 and N1,000 notes in line with its mandate.

Meanwhile, the CBN governor has disclosed that the new naira notes can not be counterfeited because of the features embedded in them. 

Similarly, he added that security agencies would be monitoring people making withdrawals at the counter to sniff out money laundering and unravel illegal usage. 

“The CBN has moved to a cashless economy. We will restrain the volume of cash someone will withdraw over the counter. We will follow up with the person’s data to know the reason for such withdrawal,” he concluded.

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Naira

President Buhari Unveils New Redesigned Naira Notes, See Pictures

Buhari launched the new naira notes as the CBN forges ahead with redesign plans.

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New Naira Notes

President Muhammadu Buhari on Wednesday unveiled the new redesigned Naira notes at the State House in Abuja following a series of sensitisation to ensure that Nigerians are aware of the deadline for the old notes.

New Naira Notes

Godwin Emefiele, the governor of the Central Bank of Nigeria, who was also present at the launching explained that the redesigned notes would help curb counterfeit, reduce hoarding and support the apex bank’s cashless policy.

Earlier in October, the central bank announced it was redesigning the N200, N500 and N1,000 notes in line with its mandate. The apex bank further stated that the newly redesigned notes would be available on December 15, 2022.

However, Emefiele later announced the central bank won’t wait until December 15th before unveiling the new notes on November 2023.

He said, “100 days is enough for any person from any part of Nigeria to deposit his money in the bank and get his money when the new notes are released.

“For information, indeed, we are no longer waiting till December 15th to unveil and begin to release the new notes.

“By the special grace of God, tomorrow, which is the 23rd of November 2022, the President has graciously accepted to unveil the new currencies and the new currencies will be unveiled tomorrow at the Federal Executive Chamber by 10am.”

New Naira notes

Meanwhile, the central bank-led monetary policy committee raised interest rates by another 100 basis points from 15.5% to 16.5%. Bringing the total increase in 2022 to 500 basis points despite the challenges Nigerians are facing amid weak job creation and poor earnings.

The committee claimed the decision was based on the rising inflation rate that rose to 21.09% in October. However, given Nigeria’s economic structure and current situation, the persistent increase was mainly to lure foreign investors to invest in the economy against the developed economies that are equally raising rates to curb escalating inflation.

 

New Naira notes

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Naira

President Buhari to Launch New Naira Notes Today

CBN says Buhari is expected to introduce redesigned naira notes to the public today at the Federal Executive Council (FEC) meeting in Abuja.

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President Buhari - Investors King

Nigerian President, Muhammadu Buhari is expected to launch the redesigned naira notes today at the Federal Executive Council (FEC) meeting in Abuja.

The launch will precede the circulation of the affected currency which is billed for December 15, 2022. The FEC meeting is a weekly (Wednesday) meeting of the executive arm of government often presided over by the President or the Vice President.

The Central Bank Governor, Godwin Emefiele disclosed on the sidelines of the Monetary Policy Committee (MPC) meeting held in Abuja on Tuesday, that the new naira notes will be displayed for public view on Wednesday. 

Therefore, the governor added that the CBN will not shift its deadline for all old notes to be returned to commercial banks in exchange for newly designed ones.

Investors King recalls that in October 2022, the central bank announced it will issue redesigned N200, N500, and N1,000 notes, effective December 15, 2022, while the new and existing currencies will remain legal tender and circulate together until January 31, 2023.

However, in a sudden change of schedule, the CBN governor noted that the unveiling will be done by the president today stating that the bank will no longer wait till December 15th to unveil and begin to release the new notes.

” By the special grace of God, tomorrow, (today) which is the 23rd of November 2022, the President has graciously accepted to unveil the new currencies and the new currencies will be unveiled tomorrow at the Federal Executive Chamber by 10am.” Emefiele started.

Meanwhile, the Monetary Policy Committee (MPC) which is the highest decision-making body for any issues related to Nigerian monetary policy has hiked the interest rates from 15.5 percent to 16.5 percent. 

According to CBN, the hike in interest rate is to curtain inflation and maintain economic stability. 

Speaking at the end of a two-day Monetary Policy Committee meeting yesterday, the CBN governor noted that the MPC voted to retain the cash reserve ratio at 32.5 percent and the liquidity ratio at 30 percent.

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