The naira slipped marginally against the safe-haven currency during the first trading session of the week, while the dollar showed strength in the global market.
The CBN data indicated that the Nigerian naira depreciated by N1.68/$ and 0.1% against the US dollar, settling at N1,535.9/$, compared to N1,534.29/$ at the previous market close.
The weaker domestic currency gained 20 Kobo against the Pound Sterling to close at N2,060/£1, compared to N2,060.34/£1 in the previous session.
Against the Euro, it appreciated by N3.85, trading at N1,782.75/€, down from N1,786.6/€. The exchange rate on the black market between the Nigerian and US currencies remained steady at N1,560/$1 on Monday.
Currency traders and market analysts maintain that the naira will continue to gain value due to the Central Bank of Nigeria’s (CBN) consistent foreign exchange inflow.
The greenback gained ground while they waited for new US inflation figures, as traders closely watched the latest trade developments. The greenback increased by 0.30% against the euro, trading at 1.16, and increased by 0.20% versus the British pound, now trading at $1.34.
As for the US Dollar Index (DXY), it is trading at a flat value of 98.50, as it is losing value relative to a basket of six other currencies. The Fed is also expected to have a few of its members speak; Thomas Barkin and Jeffrey Schmid will address the market later on.
The market is reacting to the jump in job numbers and leading PMI indicators by betting that the Fed will cut interest rates. Next month, the US Fed is expected to make a decision regarding interest rates based on the inflation report for CPI for July.
The headline CPI is anticipated to rise by 2.8% YoY in July, with core CPI also expected to surge by 3.0% YoY in the same period. Should the results come in lower than expected, this would likely shift the Fed rate cut expectation and bring the DXY down.
Analysts have indicated a 90 percent likelihood that there will be rate cuts during the September meeting, and that a total of 58 basis points (bps) will be reduced by the year’s end, which suggests two quarter-point cuts and a 33 percent possibility of a third cut.
There have not been remarkable changes in the forex market, and the analyst forecasts that, “for the medium-term outlook, the market will focus on the [U.S] Federal Reserve’s [monetary] policy.”
President Donald Trump stabilized trade relations between the two biggest economies in the world by extending a 90-day pause on higher tariffs on Chinese goods into early November. The truce was extended through November 10 by an order signed by Trump.
Postponing a tariff increase is scheduled for Tuesday. The US and China decided to lessen tit-for-tat tariff increases and relax export restrictions on rare earth magnets and specific technologies.
Trump stated in a Truth Social post that “all other elements of the Agreement will remain the same,” implying that neither the terms of the agreement nor US trade policy will be altered. The White House did not specify any changes beyond the date extension in a fact sheet. In a similar statement, China announced that it would also prolong its suspension by an additional ninety days.