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FXTM: Geopolitical Risks Leave Markets On Edge

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FXTM Research Analyst Lukman Otunuga comments on the explosive combination of Dollar strength and risk aversion & its effect on Gold.

Global stocks were mixed during trading on Monday, with participants adopting a defensive stance after the heightened geopolitical risks weighed heavily on sentiment.

Asian shares simply struggled for direction amid the cautious trading mood and the noticeable anxiety has limited gains in Europe.

With the lingering sense of caution creating a lacklustre trading atmosphere, Wall Street may struggle to find the momentum needed to venture higher this afternoon. Stock markets could come under renewed selling pressure, as geopolitical risks are compounded with the messy mixture of political uncertainty, Brexit woes and Trump developments.

Dollar Index Breaks Above 101.00
The Dollar Index breached above the 101.00 resistance level on Friday, after markets received March’s mixed US jobs report positively.

Although the dismal NFP figure of 98k initially sparked some jitters, this was swiftly countered by the unexpected decline in unemployment rates that dropped to their lowest levels in almost 10 years at 4.5%.

The upside seen in the Dollar was complimented by hawkish comments from the Fed’s Dudley, which bolstered speculation of more rate hikes this year. Whilst the geopolitical risks and renewed expectations of further rate hikes may support the Dollar bulls, the ongoing concerns over Trump’s ability to move forward with tax reforms could create some headwinds and limit gains down the line.

Sterling Slides Below 1.2400
Sterling was exposed to steep losses last week, following the unexpected drop in the British manufacturing output which reignited concerns over the health of the UK economy as it prepares to depart from the EU.

A resurgent Dollar from the mixed NFP report fuelled the downside and provided a foundation for bears to drag prices below the 1.2400 level.

With the bias towards Sterling firmly bearish amid the ongoing Brexit uncertainty, further downside may be expected with any technical bounces seen an opportunity for sellers to attack prices lower. From a technical standpoint, bears need a solid daily close below 1.2370 which could open a path lower towards 1.2300. 

Currency Spotlight – EURUSD
The growing uncertainty ahead of the upcoming French presidential elections has haunted investor attraction towards the Euro. Markets are still weighing the possibility of Eurosceptic Marine Le Pen winning the elections and the jitters have translated to downside further shocks for the Euro.

With the Dollar back in fashion amid the speculations of higher US rates, the EURUSD remains under intense selling pressure. From a technical viewpoint, the EURUSD fulfils the prerequisites of a bearish trend on the daily charts as there have been consistently lower highs and lower lows. The solid breakdown below 1.0600 could encourage a further decline back towards 1.0500.

Commodity spotlight – Gold
The explosive combination of Dollar strength and risk aversion left Gold chaotic on Friday, with prices eventually concluding the week below $1260.

While the metal remains supported in the medium to longer-term amid the geopolitical tensions and political risks across the globe, the renewed rate hike expectations could enforce downside pressures in the short term. Gold’s trajectory on the daily charts remains tilted to the upside, with bulls in firm control above the $1240 higher low.

From a technical standpoint, a solid daily close above $1260 is needed for any further upside. In an alternative scenario, a breakdown below $1240 may open a path back towards the $1225 support.


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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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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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