The Nigerian currency settled lower against the haven currency in the second trading session of the week amid high demand for the U.S. dollar in both the official and unofficial markets.
CBN data showed that the naira dipped by 30 basis points on Tuesday, settling at N1,532.94/$ in the Nigerian Foreign Exchange Market (NFEM) compared to N1,528.03/$ on Monday.
The local currency closed at N1,590/$ in the parallel market, lower than its closing settlement price of N1,575/$ on Monday.
The Nigerian currency faces uncertainty amid disruption in Nigeria’s crude exports. An explosion forced the closure of the Trans Niger Pipeline, a crucial oil route that transports crude from onshore oilfields to the Bonny export terminal. The Trans Niger Pipeline is one of two routes that export Bonny Light crude from Nigeria, with a daily capacity of roughly 450,000 barrels. Crude oil exports are Nigeria’s major FX earner.
U.S. Fed Meeting Takes the Spotlight
Currency traders are especially anticipating the Federal Open Market Committee (FOMC) meeting of the U.S. Federal Reserve (Fed) on interest rates, which will be held on Wednesday.
The Federal Reserve is anticipated to maintain interest rates at their current level while modifying its outlook on the economy and potentially the direction of interest rates in the future. U.S. Fed chief emphasized that “there is no need to be in a hurry” as central bankers look for “greater clarity” on the direction of the Trump administration.
- They are also expected to provide hints about where things are headed in light of the uncertain trade and fiscal policies of President Donald Trump.
- Markets project that the U.S. economic growth outlook raises concerns, mainly because of Donald Trump’s trade war. The American president declared he had “no intention” of lowering the 25 percent steel and aluminum surcharges placed on U.S. trading partners.
- The U.S. president promised more retaliatory actions after the European Union, China, and Canada announced retaliation for Donald Trump’s 25% steel and aluminum tariffs.
Economists are concerned that Trump’s tariffs may cause inflation to spike again, especially if the president becomes more assertive following the White House’s April 2 release of a global assessment of the tariff situation. The Fed may become even less inclined to make cuts if it becomes increasingly worried about inflation brought on by tariffs.
- The University of Michigan released weak U.S. consumer confidence data for March last Friday, following the U.S. CPI inflation data for February, which slowed more than anticipated. Official data released this Monday revealed that U.S. household consumption recovered in February, but not as much as markets had expected following a steep drop the month before.
- However, the market anticipates that the Federal Reserve, which meets Tuesday through Wednesday, will maintain interest rates between 4 percent and 4.25 percent.
The Euro was in high spirits after the German parliament approved the “debt brake” reform this afternoon (513 MPs in favor, 207 against). In his address to the Bundestag, conservative leader Friedrich Merz, who will formally take office as Germany’s chancellor at the end of the month, referred to this spending plan as “the first major step towards a new European defense community that would boost spending and economic consumption.”
