The Naira lost some grounds against the British Pound despite the latest meltdown of the British Pound in the global foreign exchange market
The Nigerian currency showed a consistent trajectory against the British pound at the Nigerian foreign exchange market.
CBN’s latest data showed that the British Pound Sterling is currently being traded at an average rate of N1,896 per Sterling
The performance of the UK economy and the Central Bank of Nigeria’s liquidity management techniques have kept the naira within the N1825-N1950//£1 price level, especially when investors respond to the Bank of England’s most recent interest rate forecasts.
The Central Bank of Nigeria (CBN) is maintaining its Monetary Policy Rate at a staggering 26.5%.
This high yield is creating a “carry trade” floor that keeps the Naira from falling as precipitously as the Sterling. The federal government capped jet fuel at N1,760-2,037 per litre to prevent a complete collapse of aviation.
This has temporarily allayed concerns about a hyperinflationary spiral in the transportation sector, although this puts a strain on the budget.
Furthermore, the local currency is frequently under additional pressure due to the seasonal demand for foreign currency at the end of the month.
Fundamentals show the Naira’s bearish run might not last in the long term. However, the American dollar will probably tame the pound and the naira at the same time if the US-Iran conflict escalates into a full return to hostilities, regardless of UK political drama
The RSI (Relative Strength Index) is currently neutral on the daily chart. This implies a “neutral” zone, meaning that neither bears nor bulls have complete control just yet. A short-term bearish signal is indicated by the GBP/NGN slightly below its 15-day moving average.
However, the fact that it is higher than the 200-day average indicates that the long-term pattern of the pound being substantially more expensive than the naira is in place.
British pound Sterling loses ground against American dollar
The British pound holds lower ground in Wednesday’s European trading as the US dollar finds its footing amid widespread risk aversion, trading at about $1.35 price levels. The British pound sterling had been subdued by the ongoing US-Iran standoff
- Investors are abandoning high-beta currencies (like Sterling) in favor of the US dollar’s safe-haven status as the two-week ceasefire expires, and the US military sends more troops to the area.
- Stalled US-Iran peace talks are driving sentiment, making people more risk-averse globally and pushing investors to the greenback. A crucial parliamentary vote on Prime Minister Keir Starmer’s handling of diplomatic appointments is coming up. Sterling bulls are cautious because of domestic unpredictability and the May 7 local elections.
British pound bulls are reluctant to take large positions because a weak performance for Labor on May 7 might result in additional leadership challenges or a change in fiscal policy to regain popularity.
- The Green Party and Reform UK have seen a spike in support of recent by-elections, indicating a “protest vote” atmosphere that could result in the governing party losing a sizable number of seats.
Additionally, the CME Fedwatch tool indicates that the Fed is unlikely to change monetary policy this year. The BoE is anticipating keeping interest rates unchanged on Thursday, just like the Fed. With an 8-1 majority, the BoE is expected to maintain interest rates at 3.75%.
BoE Chief Economist Huw Pill stressed the need to tighten monetary conditions to contain rising price pressures in an event last week, and he may be the only policymaker voting for an increase in interest rates.
