USD/NGN Outlook: Bearish, as the exchange rate is below its recent average and near recent lows, pressured by multiple factors.
Key drivers:
• Rate gap: The U.S. Federal Reserve's expectation of additional rate cuts contrasts with the Nigerian Central Bank's recent $7.5 billion intervention, which has bolstered the naira.
• Risk/commodities: Oil prices have surged to new highs, supporting Nigeria’s economy and increasing demand for the naira due to higher foreign currency inflows.
• One macro factor: Nigeria's external reserves have reached a seven-year high, contributing to investor confidence and stabilizing the naira.
Range: The USD/NGN is likely to drift within its recent range as it remains low against the Nigerian naira.
What could change it:
• Upside risk: A sudden escalation of geopolitical events involving the U.S. could lead to increased volatility and weaken the naira.
• Downside risk: Continued strength in oil prices may further support the naira, causing the USD/NGN to fall further.
