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FXTM Analysis: Financial Markets Seeking Inspiration

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FXTM Research Analyst Lukman Otunuga comments on the current moods of Sterling, WTI and Gold.

An eerie calm shrouded the financial markets last week, with global stocks floating near record highs as investors maintained a cautious trading stance.

The rising anxiety over ongoing geopolitical tensions has exposed Asian shares to losses during early trading on Monday with some disappointing data from China compounding to the downside pressure. Although the current absence of political risk in Europe continues to elevate European equities, the upside may face headwinds down the road from the persistent uncertainty gravitating around Brexit.

Wall Street relinquished short-term gains on Friday following the soft retail sales and inflation data and should be poised to edge lower this afternoon as investors re-evaluate the likelihood of an interest rate increase in June.

With an air of anxiety suffocating participants who seek risk, and soft economic data from the US and China weighing on sentiment, the “Sell in May and go away” strategy may become a popular choice.

Sterling Edges Above 1.2900
Sterling ventured higher on Monday but this appreciation felt more technical than fundamental as prices found support above the daily 20 Simple Moving Average.

Although short term bulls may exploit the upside momentum to elevate the Pound higher towards 1.3000, uncertainty over Brexit should limit gains in the medium to longer-term. Sterling bears still have a shot to attack, especially when considering that the threat of Brexit negatively impacting the UK economy has encouraged the Bank of England to maintain a dovish stance.

The central bank has already trimmed its prediction for growth this year amid the Brexit uncertainty while rising levels of inflation and sluggish wage continue to dent consumer confidence. With consumer spending likely to face a squeeze amid the accelerating inflation and vulnerable Sterling, the GBPUSD still remains exposed to downside risks.

While bulls may propel the GBPUSD towards 1.3000 in the short term, repeated weakness below 1.2775 will encourage a decline towards 1.2600.

WTI Offered Another Lifeline
Oil markets received a solid boost on Monday and bulls offered a lifeline after top exporters Saudi Arabia and Russia said that supply cuts should be extended until March 2018. While the prospect of the world’s two top oil producers working together to battle the oversupply woes may support WTI in the short term, gains may be limited if US Shale’s incessant pumping sabotages OPEC’s effort to stabilize the markets.

Although most remain cautiously optimistic that the OPEC meeting on 25 May will result in an extension to the supply cut deal, one should learn to always expect the unexpected when dealing with the cartel.

From a technical standpoint, a daily close above $49 on WTI Crude should encourage a further appreciation towards the psychological $50 level.

Commodity spotlight – Gold
Gold edged higher on Monday after weaker than expected economic data from the US on Friday exposed the Dollar to losses. Ongoing geopolitical tensions concerning North Korea continue to support the yellow metal with prices trading around $1230 as of writing.

Although Gold remains technically bearish on the daily charts, this period of uncertainty should trigger a technical bounce that opens a path towards $1245. From a technical standpoint, bulls need a daily close above $1235 to open the gates towards $1245. In an alternative scenario, a breakdown below $1225 may trigger a selloff back towards $1215.

 


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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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