- Brexit Plans Rattle Pound and Stocks as Gold Rises
The pound fell, equities slid and gold climbed on concern U.K. Prime Minister Theresa May is prepared to lead Britain out of the European Union’s single market and as the U.S. President-elect suggested other countries could break from the bloc.
Sterling fell below $1.20 for the first time since October after the Sunday Times said May is ready to withdraw from tariff-free trade with the region in return for the ability to curb immigration and strike commercial deals with other countries. Banks led European stocks lower after Goldman Sachs Group Inc. downgraded Royal Bank of Scotland Group Plc, citing exposure to volatile politics. U.S. bond markets are closed Monday due to a holiday.
Caution dominated markets amid tough talk from May and Donald Trump about Europe’s economic and political institutions. British government officials trying to limit damage to the pound will speak to major banks in London before the U.K. leader sets out her vision for leaving the bloc in a speech on Tuesday, according to people familiar with the situation. Meanwhile Trump predicted that Britain’s exit will be a success that will encourage others to do the same. He also branded NATO obsolete.
“Markets are trading in risk aversion mode,” said Neil Jones, the head of hedge-fund sales at Mizuho Bank Ltd. in London. “Investors and corporates around the world are concerned by the prospect of a hard Brexit. Pound rallies are limited and weak, while plunges are harsh and prolonged.”
Here are the main moves for the major asset classes:
- The U.K. currency traded 1.1 percent lower to $1.2052 at 10:49 a.m. in London after touching $1.1986, its weakest level since October. Overnight implied volatility in the pound against the dollar climbed to a five-month high before May’s speech. The measure exceed 30 percent, a level only breached before three events in 2016 — Britain’s EU vote and the Bank of England’s July and August meetings.
- The euro dropped 0.5 percent to $1.0588. The yen rose 0.2 percent to 114.25 per dollar, extending gains for the longest winning streak since June.
- Turkey’s lira weakened 1.2 percent. The currency jumped 3.7 percent over Thursday and Friday after the central bank took steps to prop it up by tightening liquidity.
- The Stoxx Europe 600 Index dropped 0.5 percent after retreating as much as 0.8 percent.
- Lenders and insurers led losses in Europe. Royal Bank of Scotland slid 2.8 percent.
- The U.K.’s FTSE 100 Index dropped less than 0.1 percent, poised to halt a record streak of daily gains and 10 consecutive all-time highs.
- S&P 500 futures expiring in March declined 0.2 percent to 2,267, with stock markets in the U.S. closed for a holiday.
- Yields on the U.K.’s 10-year government bonds fell five basis points to 1.31 percent after climbing seven basis points on Friday.
- Italy’s bonds underperformed their euro area peers after DBRS Ltd. downgraded the nation to BBB High, a move which will mean the securities will be subject to a higher haircut when used as in European Central Bank operations.
- Gold climbed 0.4 percent, extending last week’s surge to trade at $1,202.25 an ounce.
- Oil rose 0.3 percent to $52.51 a barrel.
- Iron ore futures jumped as much as 6.4 percent to $82.12 a metric ton, the highest level since October 2014.
Naira Remains Flat Against US Dollar, Euro
Naira Exchange Rate Remains Flat Against US Dollar and Euro on Black Market
The Naira remained unchanged on Tuesday despite the curfews and social unrest that grounded the nation’s economy.
Naira traded at N463 against the United States dollar on the black market on Tuesday morning, the same rate it exchanged on Thursday.
Against the European common currency, the Nigerian Naira exchanged at N540 to a single Euro.
However, the local currency dipped slightly against the British Pounds as it exchanged at N595 to a British Pound, representing a N3 decline from N592 it traded on Friday.
Social unrest amid weak economic fundamentals continued to weigh on Nigeria’s local currency, especially with Foreign Direct Investment expected to drop in the final quarter of the year through the first quarter of 2021.
This coupled with weak foreign reserves and a drop in global demand for crude oil is expected to compound Nigeria’s economic woes.
Lagos State governor, Babajide Sanwo-Olu, has said Nigeria’s commercial capital needs at least N1 trillion to fix the destruction and vandalisation that trailed the #EndSARS protest in the state. An amount equivalent to the state’s annual budget.
Experts, who spoke on the situation, said it would hurt the nation’s output and may plunge fourth-quarter GDP by as much as 6.9 percent. These rising uncertainties amid the second wave of COVID-19 and possible lockdown in key trading partners could further plunge Naira value against global counterparts in the fourth quarter of the year.
Transparent Exchange Rate Can Boost Nigeria’s Forex Inflow
Transparent Exchange Rate Can Improve Nigeria’s Diaspora Forex Inflow
Experts that gathered at a virtual summit organised by Ecobank Nigeria with a theme, ‘Financial Services & Remittance Solutions for Nigerians in Diaspora: Leveraging Ecobank’s Pan-African offering’, have said Nigeria can boost foreign exchange inflow through proper engagement and a transparent exchange rate.
Mr. Patrick Akinwuntan, Managing Director of Ecobank Nigeria, in his opening speech, said growing evidence has shown that diaspora remittances were positively impacting economies of various nations in the world.
Akinwuntan put the total annual remittances to Nigeria at around $20 billion per year, saying it boosts the nation’s foreign exchange earnings.
Speaking on how these remittances can be sustained, he said constant engagement with Nigerians abroad is imperative and it is the reason Ecobank is leveraging its digital technology through Rapidtransfer App and Ecobank mobile App to ensure affordable and easy transfer of funds by Nigerians abroad to their home country.
“Our dedicated Rapidtransfer, mobile remittance app is a game-changer for the market. It enables Africans and indeed Nigerians wherever they are to easily and instantly send money to bank accounts, mobile wallets and cash collection in – and across – 33 African countries.
“Historically, the cost of sending cross-border remittances to Africa has been far too high at about 6%-7%. Similarly, the process to send funds has long been inefficient and burdensome, with customers typically needing to go physically to an agent sometimes late in the night or in poor weather with attendant discomfort and risks.
“The Rapidtransfer app remittance solution is a quick, easy and reliable digital solution that removes all of these issues. It is indeed a game-changer for Nigerians and all Africans with its sustainable and standout affordability,” he said.
Speaking on transaction charges, the Ecobank Managing Director said transfer fee range from zero to about 3 percent as compared to 6 – 7 percent charge elsewhere.
He added that the bank’s instant transfer and transparent exchange rate is a unique factor its competitors do not possess.
Naira to Dollar Rate Today: Naira Exchanges at N463 to Dollar on Black Market
Naira to Dollar Rate on Black Market Today Stood at N463
The Nigerian Naira to dollar rate slid slightly against the United States dollar on Tuesday on the black market as social unrest continues to weigh on the nation’s economic outlook.
The local currency lost N1 against the US dollar to N463 while against the British pound it remains pressured at N592.
This decline continues against the European Union’s common currency, the Euro. The Naira traded at N540 to a single Euro on the black market.
Naira to dollar rate plunged amid rising economic uncertainties and unclear policy path caused by both COVID-19 and government limited fiscal buffers to cushion the negative impacts of the virus on Africa’s largest economy.
This coupled with the ongoing social unrest by the Nigerian youths to force decorum across the Nigerian Police Force and call global attention to decades of systemic intimidation and harassment of innocent citizens.
The Nigerian Stock Exchange has been closing flat since Thursday and continued this week, suggesting that investors are concerns and wary of eventualities as they look to safeguard their investments.
Again, the projected third-quarter recession, low foreign revenue generation, weak consumer spending and the rising cost of living are some of the factors hurting the Nigerian Naira outlook.
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