USD/NGN Outlook:
Bearish, given that the rate is significantly below its 90-day average and near recent lows.
Key drivers:
- Rate gap: The Federal Reserve’s decision to hold interest rates steady contrasts with the Central Bank of Nigeria’s high rate of 27.50%, which supports the naira.
- Risk/commodities: Rising oil prices could benefit Nigeria's economy, as the naira often gets boosted by oil revenue, and recent trends show oil prices at recent highs.
- Macro factor: The Nigerian naira has gained strength due to reduced foreign exchange speculation and an increase in foreign reserves, reaching over $43 billion.
Range:
Expect USD/NGN to hold steady within its recent range, with low volatility given its current position.
What could change it:
- Upside risk: A significant improvement in US labor market data could strengthen the dollar.
- Downside risk: An increase in geopolitical tensions may undermine the naira's stability, exerting further pressure on the exchange rate.
