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Pound Slips as Uncertainties About Post-Brexit Trade Linger

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U.K. pound
  • Pound Slips as Uncertainties About Post-Brexit Trade Linger

The pound declined the most in a week against the dollar amid lingering uncertainties about how long it will take for the U.K. to forge post-Brexit trade agreements with the European Union.

Sterling, which depreciated against most Group-of-10 peers, also reached a 10-month low versus the euro. Prime Minister Theresa May’s government is releasing a third paper Tuesday on how it sees its future relationship with Europe. Britain and the EU still haven’t reached an agreement on when it would be time to start discussing a trade deal.

  • The pound has been buffeted not just by political uncertainty but also by underwhelming data
    • While a report released Tuesday showed that Britain posted its first July budget surplus in 15 years last month, debt costs in the fiscal year to date rose by 23 percent, the biggest increase for the period since 2010. Recent data has showed consumers flagging and wage growth lagging inflation
    • “Better-than-expected public finance data is failing to support sterling,” said Neil Jones, the head of hedge fund sales at Mizuho Bank Ltd. “My sense is fresh news from the U.K. subprime sector may be sending off early alarm bells on consumer lending. The global subprime crises may be 10 years old but we remember it like yesterday”
  • Turmoil at Provident Financial is also weighing on pound, Jones says, with the stock slumping the most on record as Chief Executive Peter Crook stepped down and as the subprime lender forecast a full-year loss and scrapped its dividend
  • GBP/USD falls 0.4% to 1.2849, approaching 1.2832 reached on Aug. 18 which was the lowest in a month
    • Support at 1.2832, Aug. 18 low, resistance at 1.2917, Aug. 18 high
  • While the Brexit papers are a positive development, it’s failing to support the pound, likely “due to the fact that EU’s reaction so far has been muted,” analysts at Commerzbank, including Esther Reichelt, write in note
    • “That means that the next round of negotiations that start next week acquires particular significance”
    • The “Brexit risk premium therefore remains one of the major factors putting pressure on sterling,” they write
  • The latest details the U.K. government will provide focus on civil judicial cooperation ahead of a much-anticipated document Wednesday on the role of the EU Court of Justice
  • EUR/GBP little changed at 0.9163, having earlier reached 0.9173 which was the highest level since Oct. 7
    • Tops 0.9153 Fibonacci hurdle which opens up GBP ‘flash crash’ spike level at 0.9415
  • Yield on 10-year gilts rose 1bp to 1.08%

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Naira

Naira Hits Eight-Month High at 1,120/$ Amidst Central Bank Reforms

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New Naira Notes

The Nigerian Naira has surged to an eight-month high of 1,120 against the US dollar on the parallel market, commonly referred to as the black market.

This significant appreciation comes on the heels of a series of foreign exchange (FX) reforms initiated by the Central Bank of Nigeria (CBN), which have effectively unlocked dollar liquidity within the economy.

According to data compiled from online platforms and street traders, the current exchange rate reflects a gain of 62.95% for the Naira against the dollar compared to its level of 1,825 per dollar in February 2024.

Market sentiment suggests that the recent strengthening of the Naira can be attributed to a subdued demand for the US dollar, coupled with ample liquidity in the market, particularly during the holiday period.

Despite a decline in external reserves, Nigeria’s currency strengthened to 1,230.61 per dollar on the official FX market before the holidays.

The recent uptick in the Naira’s value follows the CBN’s decision to review the exchange rate for Bureau De Change (BDC) Operators to 1,101 per dollar from 1,251 per dollar.

Also, the CBN announced plans to sell $15.88 million to 1,588 eligible BDCs, further bolstering dollar liquidity in the market.

The CBN’s proactive approach to FX management, including the resolution of foreign exchange backlogs amounting to US$7 billion, has instilled confidence among investors and market participants.

Furthermore, the apex bank’s commitment to implementing reforms aimed at enhancing transparency and efficiency in the FX market has yielded positive results.

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Forex

Zimbabwe’s Gold-Backed Currency Surges 0.2% Against US Dollar

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Zimbabwe’s newly introduced gold-backed currency, known as ZiG, surged by 0.2% against the US dollar on its second day of trading.

This development has sparked both cautious optimism and renewed concerns about the nation’s financial stability.

The Reserve Bank of Zimbabwe reported that the exchange rate for ZiG strengthened to 13.53 per US dollar, compared to its initial rate of 13.56 per dollar on its debut trading day.

The slight but significant uptick in value comes as a welcome sign for Zimbabwean authorities who have been striving to establish a functional local currency amid persistent economic challenges.

The ZiG currency, introduced as the country’s sixth attempt to stabilize its monetary system, is backed by 2,522 kilograms of gold and approximately $100 million in foreign currency reserves held by the central bank.

This gold backing is seen as a crucial step to restore confidence in Zimbabwe’s currency after years of hyperinflation and currency instability.

Despite the positive momentum witnessed in the currency market, the transition to ZiG has not been without its hurdles. Banks, retailers, and utilities across the nation have been grappling with the logistical challenges of adopting the new currency, leading to disruptions in commerce nationwide.

Many businesses are still in the process of updating their systems to accommodate ZiG transactions, causing delays and confusion in payment processing.

The Zimbabwean government has set a deadline of April 12 for businesses to fully transition their electronic systems to ZiG.

However, reports indicate that only a third of the financial institutions linked to the national payments platform have been able to process ZiG payments effectively, highlighting the ongoing challenges facing the currency transition.

While the surge in ZiG’s value against the US dollar offers a glimmer of hope for Zimbabwe’s economic prospects, experts caution that sustained stability will depend on factors beyond short-term fluctuations.

Market confidence, effective monetary policies, and structural reforms will all play crucial roles in determining the long-term viability of the ZiG currency and the broader economic recovery efforts in Zimbabwe.

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Naira

Dollar to Naira Black Market Today, April 9th, 2024

As of April 9th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,200 NGN in the black market, also referred to as the parallel market or Aboki fx.

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New Naira notes

As of April 9th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,200 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,240 and sell it at N1,230 on Monday, April 9th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate improved when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.

Black Market Dollar to Naira Exchange Rate

  • Buying Rate: N1,200
  • Selling Rate: N1,190

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