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The Pound Remains Highly Vulnerable – Despite Recent Gains

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Pound Remains Vulnerable, Says Green

The pound remains highly vulnerable- despite rising sharply in recent days – and families and investors need to avoid complacency about possible significant drops, warns the CEO of one of the world’s largest independent financial advisory organisations.

The warning from Nigel Green, CEO and founder of deVere Group, comes as the pound sterling hits a 12-week high against the euro and new yearly highs against the U.S. dollar.

Mr Green says: “The pound has been on a pretty impressive run lately as investors’ appetite for risk has improved, supported in part by stronger than expected data.

“However, it’s essential that a close eye is kept on the trajectory of the pound as they could be caught off guard if their investment portfolio is not properly diversified.

“Right now, complacency should be avoided amid real and growing concerns that a sell-off could be on the horizon.”

He continues: “The threat of major tax hikes being announced in the UK’s Budget in November, and the stalled Brexit trade negotiations, which are really up against the clock now, are important reasons to remain cautious on the pound.

“Also, the UK started the pandemic with government debt at a higher level than many other G10 nations.  This has grown considerably due to the fiscal support required to protect the economy during the lockdown.

“Against this backdrop, there are valid questions on the longer-term sustainability of the pound’s outperformance so far this quarter.”
A significant drop in the value of the pound would contribute to reducing people’s purchasing power and a drop in living standards, observes Mr Green.

“Weaker sterling means imports are more expensive, with rising prices being passed on to consumers.

“The fall in the pound is good for exports some claim, but it must be remembered that around 50% of UK exports rely on imported components. These will become more expensive as the pound falls in value.

“A low pound is, of course, bad news for British holidaymakers and travellers going abroad, and also expats who receive UK pensions or income from Britain.”

He adds: “In addition, one of the UK’s most important sectors, financial services, will suffer from another knock to the pound because it is built on foreign investment that puts its faith in a strong pound.”

The deVere CEO concludes: “The pound is highly vulnerable with major issues looming that could affect its value.

“These need to be monitored to mitigate risks and to take advantage of the opportunities when they arise.”

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.

Forex

Zenith Bank Joins Other Banks to Cap International Spend Limit at $100/Month

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Zenith Bank Caps International Spend Limit at $100 Per Month

Following persistent forex scarcity impacting the nation, Zenith Bank has joined other deposit money banks capping international spend limits.

In an e-mail to customers, the lender said “Please be informed that the monthly international spend limit for your Zenith Bank Naira Card has been reviewed to US$100 while the use of Zenith Bank Naira cards for international Automated Teller Machine cash withdrawals is still temporarily suspended.’

It added that this review is in response to change in Nigeria’s macroeconomic factors.

The bank, however, advised those with higher international spend requirements than the US$100 stipulated above to visit any Zenith branch and request a foreign currency debit or prepaid card “which are available in US Dollar, Pounds and Euro variants.”

This is coming a few weeks after UBA, GTBank, First Bank and others capped their international spend limits to $100 for similar reasons. However, Zenith’s decision was after the Central Bank of Nigeria commenced forex sale to the Bureau De Change Operators across the country.

 

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Nigeria’s Foreign Exchange Inflows Decline by 43.2% in May

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CBN Says Foreign Exchange Inflows Decline to $5.52bn in May

The total foreign exchange inflows into Nigeria in the month of May declined by 43.2 percent, according to the Central Bank of Nigeria’s report.

The report said the COVID-19 pandemic negatively impacted capital inflows during the month as the total foreign exchange inflows dropped to $5.52 billion.

It said “Inflows through the CBN and autonomous sources were negatively impacted.

“On a month-on-month basis, foreign exchange flows into the economy declined to $5.52bn in May 2020.

“The decline in inflow, relative to the level in April 2020, was attributed to the lower receipts from oil sources, which fell sharply by 55.2 per cent because of the continued fragility in global crude oil demand.

“Inflow through autonomous sources, particularly invisible purchases, declined by 7.0 per cent to $3.51bn, relative to the preceding month, while there was a 66.2 per cent fall in inflow through the CBN, which stood at $2.01bn in May 2020.”

However, foreign exchange outflows from the country declined by 23.9 percent to $2.50 billion in the month. Likely because of forex scarcity and the central bank forex rate adjustments that curbed outflows by foreign investors.

A break down of the report showed that outflow through the apex bank declined by 30.9 percent to $2.19 billion, below what was recorded in April.

But outflow through autonomous sources, mainly imports and Invisibles, rose by 152.2 percent to $0.32 billion. Higher than the amount reported for the month of April.

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ECOWAS Slows Down on Eco Launch, Says Now Adopting Gradual Approach

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ECOWAS Halts Eco Launch, Says New Launching Date Will Be Announced

The Economic Community of West African States (ECOWAS) on Tuesday said it has postponed the planned launch for Eco, its single currency.

In a communiqué issued at the end of the 57th Summit of the Heads of State and Government of ECOWAS held on Tuesday, member states agreed to adopt a gradual approach for the launching of Eco given changes in economic fundamentals of member states.

They said a new road map for the launching would be announced and that member states are exempted from compliance with the body’s convergence criteria in 2020. Again, suggesting the negative impacts of COVID-19 on member states have forced the body to adopt a new launching approach, especially with most member states not meeting convergence criteria before the pandemic.

The communique read, “Member states are to be exempted from compliance with the convergence criteria in 2020, while also developing a new macroeconomic convergence and stability pact among the ECOWAS member states.”

President Muhammadu Buhari, who attended the summit, warned that the whole project could face serious jeopardy unless member states complied with agreed processes of attaining the body’s collective goal.

Buhari also expressed concern over Francophone countries within the West African Economic and Monetary Union adopting Eco as a replacement for CFA Franc ahead of the rest of member states.

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