Last week fears surrounding Brexit was a major driver of the markets, with an increasing number of economist forecasting that Britain will in fact exit the Eurozone in Thursday’s vote. Brexit, an abbreviation of “British exit”, refers to the possibility that Britain will withdraw from the European Union. The country will hold an in-out referendum on its EU membership this week Thursday, June 23. Consequently the Pound depreciated against all major currencies. If the exit does materialise, it will cause more currency to be sold off, which will have a negative impact on the UK economy as trade with other EU members will be directly affected.
In line with market sentiments, The Federal Open Market Committee (FOMC) decided to leave rates unchanged. Members of the committee were more dovish this time on their dot plot as the median signalled two interest rates hikes are still due in 2016, though an increasing number of the committee members forecast only one. The risk-on trades, which normally follow the statement, were not as aggressive as observed in the past.
Nigeria’s central bank is set to devalue its currency, the Naira, which has been pegged to the US dollar at 197 for the past 16 months. This has given rise to a parallel black market where the currency trades around 350 to the US dollar, the bank will pursue a ‘managed float’ to the US dollar and markets will set the price. We expect a sharp fall of the Naira when the markets open on the 20 of June.