E-Financial
Market Sentiment Sours on Rising US Political Risk
By Lukman Otunuga, Senior Research Analyst, FXTM
Rising political risk in the United States has joined the growing list of negative themes weighing heavily on global sentiment.
In a dramatic development overnight, US lawmakers have called for an impeachment inquiry against US President Donald Trump. Given how this increases the prospect of heightened political uncertainty in the world’s largest economy and compounds the list of geopolitical factors, risk assets and global equities in particular remain in the firing line. The negative mood lingering across markets is also being fueled by renewed US-China trade uncertainty after Trump criticized China’s trade practices in a United Nation’s speech. Fresh signs of escalating trade tensions between the world’s two largest economies will be negative for market sentiment as investors fret over slowing world growth.
Asian markets slipped on Wednesday morning as US political uncertainty and trade concerns drained investor confidence. The growing caution and absence of risk appetite could find its way into European markets later this morning.
Pound bulls experienced a sugar rush on Tuesday after the Supreme Court ruled Boris Johnson’s suspension of Parliament ‘unlawful, void and to no effect’.
However, gains were later surrendered as investors refocused on the bigger picture and what it meant for Brexit. Given how the prime minister said he disagreed with the Supreme Court ruling and vowed that Britain would leave the EU by the 31 October deadline, nothing has changed in this complicated Brexit equation. Opposition leaders are already calling for Boris Johnson to resign which will add to the political uncertainty as the clock ticks down. Investors should fasten their seat belts and prepare for more drama and action in the Brexit saga as Parliament reconvenes on Wednesday.
There are so many questions drifting in the air over what to expect in the coming weeks and this compounds the overall uncertainty. Will Johnson be able to strike a deal in Brussels on October 17-18? Will he be forced to seek an extension to Article 50? Will there be a general election? Does the prime minister have a plan B?
The British Pound could transform into a fierce battleground for bulls and bears due to its sensitivity to Brexit developments.
Looking at the technical picture, prices still remain in a downtrend on the weekly charts. However, a solid weekly close above 1.2500 should open the doors towards 1.2700.
Egyptian stocks hit by protest uncertainty
Egypt’s benchmark EGX30 index fell over 4% on Tuesday as protests in Cairo and other cities over the weekend sparked risk aversion consequently dampening appetite for riskier assets.
While concerns over further escalation may drag the index lower, losses could be cushioned by Egypt’s improving macro-economic conditions. The nation expanded by 5.3% in 2018 which was its highest rate of growth in 10 years while inflation is at its lowest level in six years at 7.5%. Overall sentiment towards the economy has the potential to improve if the Central Bank of Egypt cuts its key interest rates on Thursday in an effort to stimulate growth.
E-Financial
Lagos State Appoints MoneyMaster as Payment Partner for “Ounje Eko” Programme
“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.
E-Financial
CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering
Central Bank of Nigeria (CBN), is investigating irregular foreign exchange transactions and forward contracts valued at approximately $2.4 billion.
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.
E-Financial
CBN Urges Banks to Expedite Action on Recapitalisation
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.
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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