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FXTM Analysis – Sterling Depressed Ahead of UK Budget

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FXTM Research Analyst Lukman Otunuga comments on heightened investor anxieties ahead of the UK Spring Budget speech.

Sterling bears were unleashed during Wednesday’s trading session, with the GBPUSD sinking to a fresh seven-week low at 1.2150 as investor anxiety heightened ahead of the UK Spring Budget speech.

Treasury chief Philip Hammond will be in the limelight today, and is set to provide some insight on the UK government’s financial plans as it embarks on its quest to exit the European Union.

Although Hammond has stated that he may adopt a cautious approach in the Spring Budget to ensure that the UK is safeguarded from Brexit, rapidly rising Brexit-fuelled uncertainties have already negatively impacted sentiment.

With there being a live threat of the UK economy facing serious long-term risks from Brexit, fiscal discipline should be maintained, with the government potentially holding back on any spending increases.

While some may be optimistic over the upgraded growth forecast for 2017 and are likely to receive reassurance from Hammond on the bright future of the UK economy, most participants remain jittery from the recent string of soft economic releases. Political developments continue to dictate market movements and this may mitigate the impact the Spring Budget has on Sterling, with sellers exploiting the anxiety ahead of the Article 50 invocation to send prices lower.

From a technical standpoint, the GBPUSD is heavily bearish on the daily charts as there have been consistently lower lows and lower highs. A breakdown below 1.2150 could encourage a decline towards 1.2000.

ADP NFP in focus
The Greenback has maintained its dominance in the currency markets during trading this week, as speculations heighten over the Federal Reserve raising US interest rates next week. With US economic data repeatedly beating expectations, sentiment towards the Dollar remains firmly bullish.

Although some Trump uncertainties continue to linger in the background, the main focus now is the Fed taking action and this continues to support the currency. Investors may direct their attention towards the pending ADP Non-Farm employment report, which could elevate the Greenback higher if the data exceeds estimates.

From a technical standpoint, the Dollar Index is bullish on the daily charts. A breakout and daily close back above 102.00 could encourage an incline higher towards 102.50.

Gold Descends to Five-Week Low
Gold was exposed to further losses during trading on Wednesday, as expectations intensified over the Federal Reserve raising US interest rates next week.

A resurgent Dollar from the improving sentiment towards the US economy has fuelled the selloff, with prices sliding to a fresh five-week low at $1212 as of writing.

The recurrent weakness displayed on Gold suggests that bulls have surrendered from the battle against rate hike expectations, with further downside expected on Friday if NFP exceeds expectations.

From a technical standpoint, prices are trading below the daily 20 SMA, while the MACD has crossed to the downside. Previous support around $1220 could transform into a dynamic resistance that encourages a decline towards $1200 and potentially go even lower.

 

 


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E-Financial

Lagos State Appoints MoneyMaster as Payment Partner for “Ounje Eko” Programme

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“Ounje Eko”, the food price discount initiative of the Lagos State Government, has appointed leading payment service bank, MoneyMaster Payment Service Bank Limited (MMPSB), as its collaborator in the bid to ensure ease of payments at the market.

MoneyMaster is one of the Central Bank of Nigeria-licensed Payment Service Banks (PSBs) to promote financial inclusion across Nigeria.

Under the partnership, MMPSB will apply its cutting-edge payment solution to engender easy payment and reconciliation in order to make   the experiences of Lagosians who will be getting their food supplies from the markets pleasurable. Its payment solution is also all-encompassing and ensures real time value to payment destinations.

The mobile bank was appointed as the collection and payment partner for “Ounje Eko” Food Markets programme which is a government initiative serving the five divisions of Lagos State. Consequent on this, MoneyMaster Payment Service Bank will collect payments in 57 LCDAs in the state.

The partnership gives credence to the quality of payment solutions that MoneyMaster is reputed for in its services to its growing business clientele in private and public sectors.

 


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E-Financial

CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering

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Central Bank of Nigeria (CBN), is investigating irregular foreign exchange transactions and forward contracts valued at approximately $2.4 billion.

CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering

The  inquiry follows an extensive audit by Deloitte, which scrutinized $7 billion in dollar debts accumulated under the bank’s previous leadership.

In the aftermath of the 294th Monetary Policy Committee meeting in Abuja, Yemi Cardoso, governor of CBN,  disclosed to journalists that the investigation, supported by the Economic and Financial Crimes Commission, among other security bodies, aims to clarify the legitimacy of these FX allocations identified as problematic by the audit.

“It was determined that a number of these transactions did not qualify…they were outright illegal. The law enforcement agencies are now looking into those transactions that as far as we are concerned, are not valid to be paid,” Cardoso detailed, emphasizing the unlawful nature of these forex deals.

The crux of the investigation lies in the audit findings that a significant portion of the scrutinized transactions lacked proper documentation and, in many instances, were deemed outright illegal.

However, the unfolding investigation has raised concerns within the organized private sector, with some entities contemplating legal action against commercial banks for unresolved forex bids.

Despite these tensions, Governor Cardoso reassures that the foreign exchange market remains open and transparent, inviting stakeholders to address their forex needs through the official channels.

Furthermore, Cardoso clarified the distribution of fertilizers to farmers as a one-off measure and not indicative of a shift back to direct interventions by the CBN, underscoring a commitment to strategic, regulatory governance rather than direct market involvement.

 

 

 

 

 

 

 

 


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CBN Urges Banks to Expedite Action on Recapitalisation

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Central Bank of Nigeria (CBN) has directed deposit money banks in the country to expedite action to increase their capital base from the current ₦25bn.

CBN Urges Banks to Expedite Action on Recapitalisation

Olayemi Cardoso, governor of CBN

Olayemi Cardoso, governor of CBN, stated this during the apex bank’s 294th meeting of the Monetary Policy Committee (MPC) on Tuesday in Abuja, when the MPC hiked the interest rate by 22.75% to 24.75%.

The apex bank chief said the MPC examined developments in the banking sector and expressed satisfaction that the industry remained stable. The committee, however, said to guard against risk, commercial banks in the country should accelerate their recapitalisation efforts.

Cardoso said, “The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable. The committee thus called on the bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macro-potential guidelines.

“The MPC also enjoined the banks to expedite actions on the recapitalisation of banks to strengthen the system against potential risks in an increasingly globalised world.”

 

 

 

 


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