Naira down by 1.2%, Pound sterling remains volatile

Nigeria’s naira eased 1.2 percent against the dollar on the black market on Tuesday despite the Central Bank of Nigeria attempt to improve dollar supply and prop up the local unit.

On Monday, the bank auctioned $100 million in forwards to be settled between one week and 30 days’ time, as against 60-day contracts it had written previously, shortening the settlement period on forward contracts to inject liquidity.

The naira was quoted at 410 per dollar on the black market on Tuesday, weaker than the 405 it closed at the previous day. It closed flat on the official market at 306.10 naira.

The CBN, opposed to a free naira float, has been selling the U.S. currency on the official currency market to try to narrow the spread with the black market rate after the black market rate hit a record high of 520 in February.

Meanwhile, the Pound Sterling remained volatile on Tuesday, with prices oscillating between losses and gains after markets digested the UK’s steady 2.3% inflation figure for March, which was the highest level since September 2013.

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Focusing on the technical outlook, Sterling remains gripped by Brexit woes, with prices pressured on the daily charts. The candlesticks are trading below the daily 20 Simple Moving Averages, while the MACD is in the early stages of crossing to the downside. Weakness below 1.2400 could be the first signs of a steeper decline, with a breakdown below 1.2370 opening a path towards 1.2300.

Similarly, the growing unease and anxiety ahead of the French presidential elections in a few weeks have exposed the Euro to downside risks. Recent polls showing a four-way battle in claiming the French presidency, with Emmanuel Macron and Marine Le Pen on track to winning the first round, have created jitters.

With the growing threat of Eurosceptic parties destabilizing the Eurozone’s unity weighing heavily on sentiment, the Euro may be in store for further punishment. From a technical standpoint, the EURUSD is bearish on the daily charts. Prices are trading below the daily 20 SMA, while the MACD has crossed to the downside. Weakness below 1.0600 could encourage a further decline lower towards 1.0500.

The horrible combination of geopolitical risks and political uncertainty has soured appetite for riskier assets, with investors sprinting to safe-haven investments. Global stocks were vulnerable to losses during trading on Tuesday amid the heightened geopolitical tensions, with the lack of appetite for riskier assets pressuring Asian and European markets. The bearish contagion from Europe could contaminate Wall Street this afternoon, consequently limiting gains as investors turn to Gold for safety.