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The Nigerian currency continued its bullish trend against the British pound due to Nigeria’s strengthening economic fundamentals.
The naira maintained its hold below the N1,800/£ resistance level, settling at N1,767/£ against the British pound at the official market on Wednesday.
Long stop-loss orders against the naira were triggered below N1,800/£, as evidenced by heavily bearish GBP/NGN candles on the weekly and daily charts, coupled with volume indicating institutional efforts to counter low-liquidity short positions.
The currency pair posted intraday consolidation within the mid-N1,750s/£, as the order book underwent mild fluctuations over recent quarters. The pair has also been influenced by liquidity variations in the Nigerian foreign exchange market and global foreign exchange valuations of the British Pound.
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The Central Bank of Nigeria (CBN) remains dedicated to restoring stability to the domestic foreign exchange market by addressing the backlog and tightening monetary policy to control inflation. Additionally, higher crude oil prices have positively impacted the naira’s outlook in the foreign exchange market.
Nigeria’s foreign exchange earnings are closely tied to developments in global oil prices.
Variations in crude oil output and world energy prices directly affect the naira’s strength. The US Dollar struggled to gain significant ground against the British Pound and traded around the 1.3200 level on Thursday, its lowest level since late June of the previous year.
US dollar pulls back against British pound amid elevated US Bond yields
The US Dollar (USD) posted a bearish run towards the British currency, trading below an 18-month high amid the Federal Reserve’s hawkish stance, elevated US bond yields, and geopolitical uncertainties.
- Conversely, hawkish expectations for the Bank of England (BoE) appear to support the GBP/USD pair and prevent further declines. Technically, the recent range-bound price action observed over the past few weeks can be interpreted as a bearish consolidation following the rapid decline from the August swing high.
- Notably, the upper boundary of this range coincides with the 100-period simple moving average (SMA) on the 4-hour chart, indicating potential for further downward movement.
The MACD indicator remains negative with a narrowing profile, suggesting that downside momentum persists, albeit not strongly. Additionally, the RSI reading of 41.7 remains below the midpoint, confirming a mildly negative bias and the potential for a decisive breakdown below the support level at approximately $1.3180.
US Treasuries rallied; the 10-year yields surged as high as 5.35%, the highest since April 2002, while 30-year bonds also reached levels not seen in 24 years. Oil prices increased above $100 per barrel following Iran’s escalated attacks on tankers in the Strait of Hormuz. Rising oil prices tend to accelerate inflation, which in turn depresses bond prices and pushes yields upward.
Investors also increased their holdings of Treasuries in anticipation of Wednesday’s auction of $39 billion in new 10-year debt and Thursday’s auction of 30-year bonds, along with buybacks of existing securities.
European investors divested from French debt to purchase safer German bonds, which kept the yield on the 10-year German government bond near 3.5%. This situation results in the US 10-year yields exceeding German yields by more than 1.8 percentage points. To gain the additional spread on the US dollar, investors typically purchase dollars prior to acquiring the bonds. The euro, accounting for 58% of the US Dollar Index, contributes approximately three-quarters of the index increase.
