EUR/NGN Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and struggling for momentum.
Key drivers:
• Rate gap: The European Central Bank has maintained a cautious stance on monetary policy while the Central Bank of Nigeria is actively supporting the naira with significant market interventions.
• Risk/commodities: Oil is currently above its recent average, which typically benefits the naira, but volatility may add uncertainty to currency dynamics.
• One macro factor: Nigeria’s inflation is projected to rise sharply, which could weigh on the naira and overshadow positive market developments.
Range: EUR/NGN is expected to drift within its recent range, potentially testing the lower extremes but lacking drivers for a substantial breakout.
What could change it:
• Upside risk: A substantial decrease in oil prices could negatively impact the naira, prompting a reevaluation of its value against the euro.
• Downside risk: An unexpected shift in ECB policy could bolster the euro, causing it to appreciate against the naira.
