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Euro-Pound Parity Call Reverberates as Morgan Stanley Joins HSBC

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  • Euro-Pound Parity Call Reverberates as Morgan Stanley Joins HSBC

What once seemed a highly unlikely call on euro-sterling is gaining momentum, with two of the world’s leading banks predicting that Europe’s shared currency will attain and even go beyond parity with the pound for the first time.

Morgan Stanley sees the pair at 1.02 by the end of March, which represents a 12 percent gain for the euro from current levels, while HSBC Holdings Plc is sticking to its forecast that the euro will trade one-for-one against the pound by year-end. Standard Bank strategist Steve Barrow said “it’s not a huge leap of faith to suggest we could get up to the parity area.” It would be “foolhardy” to rule out the prospect of the euro reaching the one-pound mark, according to Rabobank International’s senior currency analyst Jane Foley.

The euro has surged more than 6 percent against the pound this year amid speculation that the European Central Bank will announce a tapering of bond purchases by autumn. By contrast, the pound is being held down by uncertainty surrounding Brexit negotiations.

“In euro-sterling we’ve had a very strong conviction and it’s one of the biggest forecasts I ever remember making on a major currency,” David Bloom, HSBC’s London-based global head of currency strategy said in an interview last week. That’s “a 20 percent move and that’s quite something. It’s very unusual that we make such, what was at that time, an outrageous forecast” but “we are roughly half way there and we believe in it,” he said.

Bloom first made his parity call a year ago, when the euro was around 83 pence. HSBC predicts the euro and the pound ending this year at $1.20, which are both “strong views,” he said.

Euro-sterling was at 0.9084 as of 3:07 p.m. in London, having reached 0.9119 on Aug. 11, its strongest level since October. The pair reached a record 0.9803 in December 2008.

Diverging Politics

Since France elected pro-European leader Emmanuel Macron in May, risks of the currency bloc fragmenting have diminished. In addition, euro-region economic data are showing signs of improvement. In contrast, Brexit negotiations are far from clear and that’s weighing on the pound. That’s the main concern for Standard Bank’s Barrow.

It all “depends a lot of how the Brexit negotiations go,” he said. “On euro-sterling previously we thought the 90-92 area might be the peak, but obviously now I no longer do.”

While Morgan Stanley’s parity call is partly due to a bullish-euro outlook, the U.K. currency is “likely to weaken in its own right, driven by weak economic performance, low real yields and increasing political risks,” Hans Redeker, head of foreign-exchange strategy, wrote in a client note dated Aug. 10.

Minority View

Still, the number of analysts calling for parity in the pair is relatively small. Of the 62 participants in a Bloomberg currency survey, only HSBC and Morgan Stanley see the pair at or above 1.00 by mid-2018.

For ING Groep NV’s Viraj Patel, the recent move higher in the euro versus the pound is more of an “overshoot, rather than a broader trend toward parity.”

There are risks that “over-exuberant EUR markets are front-running ECB QE tapering, as well as fading cliff-edge Brexit risks, limit the scope to which EUR/GBP can move materially beyond 0.90,” he wrote in a client note last week. “Domestic and geopolitical uncertainties may see us trade in the 0.9000-0.9150 range in the near term, with greater risks of a downside breakout.”

Sterling is “a different animal to most currencies,” as politics overshadows and complicates predicting it, according to HSBC’s Bloom. But when it comes to parity, “we are not a million miles away, so I am still in it.”

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.

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Naira

Naira Exchange Rates Today, Friday, July 30, 2021

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BDC Operators - Investors King

Naira gained N5 against the United States Dollar on Friday morning to N520 at the parallel market popularly known as the black market.

Against the British Pound, the local currency dropped N5 from N710 recorded on Wednesday to N715 on Friday, while against the European it remained at N600, the same rate it traded in the last three days.

The Naira plunged against its global counterparts after the Central bank of Nigeria accused Bureau De Change Operators (BDCs) of illicit money flows and market manipulations that over time have sustained the unregulated black market section of forex.

Operators at the bureau de change section of forex had been accused of being the main source of forex for speculators and hoarders that manipulate forex rates at the unregulated black market, this the CBN plans to curb by cutting its weekly forex supply to BDCs but focus on servicing the economy through the banks.

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
30/07/2021 512/520* 705/715* 590/600* 70/75 410/420 300/325
29/07/2021 512/520 705/715 590/600 70/75 410/420 300/325
28/07/2021 515/525 700/710 590/600 63/70 410/420 300/320
27/07/2021 500/505 695/703 585/592 62/69 407/415 300/320
26/07/2021 500/504 695/703 585/592 62/69 407/415 300/320
23/07/2021 500/504 698/705 588/595 62/69 407/415 300/320
22/07/2021 498/503 695/703 585/590 62/69 407/415 300/320
19/07/2021 495/503 698/705 585/592 62/69 407/415 300/320
16/07/2021 502/506 700/708 590/596 62/69 407/415 300/315
15/07/2021 500/505 700/708 590/596 62/69 407/415 300/320
14/07/2021 500/505 702/708 590/595 62/68 407/415 300/320
13/07/2021 500/505 702/708 590/595 62/68 407/415 300/320
12/07/2021 500/505 700/708 590/595 62/69 407/415 300/320
09/07/2021 500/505 700/708 588/593 62/69 407/417 300/320
08/07/2021 499/503 700/708 588/593 62/69 407/417 300/325
07/07/2021 499/503 700/710 588/593 62/69 407/417 300/325
06/07/2021 499/503 698/710 590/595 62/69 407/417 300/325

Bureau De Change Naira Rates

Date USD GBP EURO
NGN BUY/SELL BUY/SELL BUY/SELL
30/07/2021 510/525 705/715 590/602
29/07/2021 510/525 705/715 590/602
28/07/2021 510/520 695/706 585/600
27/07/2021 490/500 690/700 580/595
26/07/2021 490/500 694/705 580/595
23/07/2021 490/500 694/705 580/595
22/07/2021 490/500 690/705 580/595
19/07/2021 490/500 690/707 580/595
16/07/2021 490/500 700/710 585/600
15/07/2021 490/500 698/710 585/600
14/07/2021 490/500 698/710 590/595
13/07/2021 490/500 697/710 585/600
12/07/2021 490/500 698/710 585/600
09/07/2021 490/500 698/710 585/600
08/07/2021 490/500 697/710 585/600
07/07/2021 490/500 697/710 585/600
06/07/2021 490/500 697/710 585/600
05/07/2021 490/500 700/714 585/600

Central Bank of Nigeria’s Official Naira Rates

Date Currency Buying(NGN) Central(NGN) Selling(NGN)
7/28/2021 US DOLLAR 409.16 409.66 410.16
7/28/2021 POUNDS STERLING 567.8322 568.5261 569.22
7/28/2021 EURO 483.0543 483.6446 484.2349
7/28/2021 SWISS FRANC 446.8276 447.3736 447.9196
7/28/2021 YEN 3.7163 3.7208 3.7253
7/28/2021 CFA 0.7176 0.7276 0.7376
7/28/2021 WAUA 580.7934 581.5032 582.2129
7/28/2021 YUAN/RENMINBI 62.9303 63.0077 63.085
7/28/2021 RIYAL 109.0919 109.2252 109.3585
7/28/2021 SOUTH AFRICAN RAND 27.6161 27.6498 27.6836

N.B: These tables are updated three times a day.

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Naira

Naira Exchange Rates Today, Thursday, July 29, 2021

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Naira to Dollar Exchange- Investors King Rate - Investors King

Naira continues its decline across the board as forex scarcity persists following the Central Bank of Nigeria’s decision to cut off the bureau de change forex section.

The Naira exchanged against the United States Dollar at N520 on Thursday at the black market. Against the British Pound and the Euro, the local currency exchanged at N715 and N600, respectively.

The Central Bank of Nigeria had accused Bureau de Change operators of engaging in money laundering and illicit flows with criminal-minded individuals that operate mainly at the unregulated black market section of forex.

Operators at the bureau de change section of forex had been accused of being the main source of forex for speculators and hoarders that manipulate forex rates at the unregulated black market, this the CBN plans to curb by cutting its weekly forex supply to BDCs but focus on servicing the economy through the banks.

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
29/07/2021 512/520 705/715 590/600 70/75 410/420 300/325
28/07/2021 515/525 700/710 590/600 63/70 410/420 300/320
27/07/2021 500/505 695/703 585/592 62/69 407/415 300/320
26/07/2021 500/504 695/703 585/592 62/69 407/415 300/320
23/07/2021 500/504 698/705 588/595 62/69 407/415 300/320
22/07/2021 498/503 695/703 585/590 62/69 407/415 300/320
19/07/2021 495/503 698/705 585/592 62/69 407/415 300/320
16/07/2021 502/506 700/708 590/596 62/69 407/415 300/315
15/07/2021 500/505 700/708 590/596 62/69 407/415 300/320
14/07/2021 500/505 702/708 590/595 62/68 407/415 300/320
13/07/2021 500/505 702/708 590/595 62/68 407/415 300/320
12/07/2021 500/505 700/708 590/595 62/69 407/415 300/320
09/07/2021 500/505 700/708 588/593 62/69 407/417 300/320
08/07/2021 499/503 700/708 588/593 62/69 407/417 300/325
07/07/2021 499/503 700/710 588/593 62/69 407/417 300/325
06/07/2021 499/503 698/710 590/595 62/69 407/417 300/325

Bureau De Change Naira Rates

Date USD GBP EURO
NGN BUY/SELL BUY/SELL BUY/SELL
29/07/2021 510/525 705/715 590/602
28/07/2021 510/520 695/706 585/600
27/07/2021 490/500 690/700 580/595
26/07/2021 490/500 694/705 580/595
23/07/2021 490/500 694/705 580/595
22/07/2021 490/500 690/705 580/595
19/07/2021 490/500 690/707 580/595
16/07/2021 490/500 700/710 585/600
15/07/2021 490/500 698/710 585/600
14/07/2021 490/500 698/710 590/595
13/07/2021 490/500 697/710 585/600
12/07/2021 490/500 698/710 585/600
09/07/2021 490/500 698/710 585/600
08/07/2021 490/500 697/710 585/600
07/07/2021 490/500 697/710 585/600
06/07/2021 490/500 697/710 585/600
05/07/2021 490/500 700/714 585/600

Central Bank of Nigeria’s Official Naira Rates

Date Currency Buying(NGN) Central(NGN) Selling(NGN)
7/28/2021 US DOLLAR 409.16 409.66 410.16
7/28/2021 POUNDS STERLING 567.8322 568.5261 569.22
7/28/2021 EURO 483.0543 483.6446 484.2349
7/28/2021 SWISS FRANC 446.8276 447.3736 447.9196
7/28/2021 YEN 3.7163 3.7208 3.7253
7/28/2021 CFA 0.7176 0.7276 0.7376
7/28/2021 WAUA 580.7934 581.5032 582.2129
7/28/2021 YUAN/RENMINBI 62.9303 63.0077 63.085
7/28/2021 RIYAL 109.0919 109.2252 109.3585
7/28/2021 SOUTH AFRICAN RAND 27.6161 27.6498 27.6836

N.B: These tables are updated three times a day.

 

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Forex

CBN Orders Deposit Money Banks To Sell FX To Customers

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Forex Weekly Outlook October 17-21

The Central Bank of Nigeria, CBN, has ordered Deposit Money Banks, DMBs to sell foreign exchange (FX) to customers.

CBN disclosed this in a letter to all banks reminding them to set up teller points at designated branches across the country to fulfill legitimate FX requests by customers.

The regulator, on Tuesday, has announced the discontinuity of forex supplies to the Bureau de Change Operators, BDCs in the country over their continuous abuse of the privilege.

The letter, signed by Haruna Mustafa Director, Banking Supervision Department, stated: “Further to the Monetary Policy Committee (MPC. briefing of July 27, 2021, al Deposit Money Banks (DMBs are hereby reminded to set up teller pots at designated branches across the country to fulfil legitimate FX requests for Personal Travel Allowance (PTA Business Travel Allowance (BTA, tuition fees, medical payments SMEs transactions amongst others.

“In this regard, DMBs are also required to adequately publicize the locations of the designated branches and make necessary arrangements to sell FX to customers in cash and/or electronically in compliance with extant regulations.

“DMBs are strongly advised to ensure that no customer is turned back or refused FX provided that documentation and all other requirements are satisfied. Equally undue delays, rationing and/or diversion of FX is strongly discouraged whilst DMBs are required to establish electronic application and alert systems to update customers on the status of their FX requests.

“As communicated during the briefing, a toll-free line has been set up at the CBN for bank customers to escalate unresolved complaints related to their FX requests.

“The CBN will continue to closely monitor banks’ conduct and compliance with this directive in order to ensure an efficient FX market for all legitimate users.

“Please note that any breach of the directive will be severely sanctioned.”

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