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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.”

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.

Naira

Naira Exchange Rates; Tuesday, May 18, 2021

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nigerian currency - Investors King

Nigerian Naira opened at N484 to a United States Dollar on Tuesday at the parallel market, popularly known as the black market. Against the British Pound, it exchanged at N678 and N581 to a single Euro.

Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
18/05/2021 480/484* 670/678* 577/581* 62/68 390/402 292/320
17/05/2021 480/484 670/678 577/581 62/68 390/402 292/320
14/05/2021 480/484 670/680 576/581 62/69 390/400 292/320
13/05/2021 479/483 665/673 576/581 62/69 391/402 292/320
12/05/2021 479/483 665/673 576/581 62/69 395/400 292/320

Bureau De Change Naira Rates

Date USD GBP EURO
NGN BUY/SELL BUY/SELL BUY/SELL
18/05/2021 475/482 670/677 575/584
17/05/2021 475/482 670/677 575/584
15/05/2021 475/482 670/677 575/584
14/05/2021 475/482 670/677 575/584
13/05/2021 475/482 665/674 573/584
12/05/2021 475/482 665/674 573/584

Central Bank of Nigeria’s Official Naira Rates

Date Currency Buying(NGN) Central(NGN) Selling(NGN)
5/10/2021 US DOLLAR 379 379.5 380
5/10/2021 POUNDS STERLING 535.4891 536.1956 536.902
5/10/2021 EURO 461.3946 462.0033 462.612
5/10/2021 SWISS FRANC 421.8141 422.3706 422.9271
5/10/2021 YEN 3.4868 3.4914 3.496
5/10/2021 CFA 0.6777 0.6877 0.6977
5/10/2021 WAUA 543.4332 544.1502 544.8671
5/10/2021 YUAN/RENMINBI 58.9792 59.0574 59.1357
5/10/2021 RIYAL 101.0451 101.1784 101.3117
5/10/2021 SOUTH AFRICAN RAND 26.8863 26.9218 26.9572

 

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Naira

Naira Exchange Rates; Monday, May 17, 2021

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Naira - Investors King

The Nigerian Naira opened the week at N484 to a United States Dollar on Monday at the parallel market. The local currency remained stable against the  British Pound at N678 and N581 to a single Euro.

Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
17/05/2021 480/484 670/678 577/581 62/68 390/402 292/320
14/05/2021 480/484 670/680 576/581 62/69 390/400 292/320
13/05/2021 479/483 665/673 576/581 62/69 391/402 292/320
12/05/2021 479/483 665/673 576/581 62/69 395/400 292/320

Bureau De Change Naira Rates

Date USD GBP EURO
NGN BUY/SELL BUY/SELL BUY/SELL
17/05/21 475/482 670/677 575/584
15/05/21 475/482 670/677 575/584
14/05/21 475/482 670/677 575/584
13/05/21 475/482 665/674 573/584
12/05/21 475/482 665/674 573/584

Central Bank of Nigeria’s Official Naira Rates

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Forex

Nigeria’s Diaspora Remittances Decline by 28 Percent to $16.8 Billion in 2020

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US dollar - Investors King

Nigeria’s diaspora remittances declined by 27.7 percent or $4.65 billion from $21.45 billion in 2019 to $16.8 billion in 2020, according to the World Bank Migration and Development report.

A critical look into the report shows remittances to sub-Saharan Africa declined by 12.5 percent in 2020 to $42 billion. This was largely due to the 27.7 percent recorded by Africa’s largest economy, Nigeria, which accounted for over 40 percent of the total remittance inflows into the region.

The report noted that once Nigeria’s remittance inflows into the region are excluded, remittances grew by 2.3 percent in 2020 with Zambia recording 37 per cent.

Followed by 16 percent from Mozambique, 9 percent from Kenya and 5 percent from Ghana.

The decline was a result of the global lockdown that dragged on the livelihood of most diaspora and unclear economic policies.

In an effort to change the tide, the Central Bank of Nigeria (CBN) introduced a Naira 4 Dollar Scheme to reverse the downward trend and boost diaspora inflows into the economy.

However, the reports revealed that other external factors like insecurities, global slow down, weak macroeconomic fundamentals, etc continue to discourage capital inflows.

On Tuesday, the CBN, in a new directive, announced it has halved dollar cash deposit from $10,000 to $5000 per month.

The move is geared towards discouraging overreliance on the United States Dollar and encourage local patronage and production.

Mr. Guy Czartoryski, Head of Research at Coronation Asset Management, had said in the report, “We looked at the top 10 banks and the breakdown of their deposits showed that 40 per cent of their deposits are in dollars and it is quite astonishing.”

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