Good morning

After last week’s super Thursday the GBP (USD) has been trading in a new range 1.5425-1.5525 as the market awaits the next USD move. With the summer holidays in Europe in full swing the GBP has had little to trade against and thus has left the GBP trading pretty much in no man’s land. Expectations as you know are high that the US will rates in September and thus the big swings will in all likelihood start to manifest themselves towards the end of the month as FX traders come back from their holidays and begin to align their books in the expectation that US rates are on the rise.

Negotiations to secure a third bailout deal in time to prevent Greece from defaulting this month on bonds owned by the ECB appear to be advancing in the wake of the deliberations held between Greece and her creditors over the weekend. Greek Finance Minister Euclid Tsakalotos and Economy Minister George Stathakis met Sunday with the European Commission, IMF, ECB and the Eurozone’s own bailout fund. Greek officials said they discussed the economic overhauls and budget cuts the government needs to complete to clinch a third loan package of up to €86bn, and secure the first tranche of aid from the bailout. European officials are quoted as saying “a lot of progress had been made.”  With the 20th Aug. deadline fast approaching, when €3.2 billion of Greek government bonds owned by the ECB come due, the pressure is back on to secure a lasting agreement. Defaulting on these bonds would severely complicate Greece’s chances of the remaining funds, given they would likely compel the ECB to withdraw its extensive support to Greek banks. The hope is after the fiasco of the previous negotiations the coming bailout agreement will be easier and simpler to accomplish. Needless to say nothing is certain so do not be surprised to hear of hearsay and rumours surfacing about negotiation complications.

Nigeria’s Central Bank surprised the market and announced (last week) the prohibition of the acceptance of foreign currency cash deposits. The move is expected to ring-fence the Nigerian economy against illicit financial flows as well as check the activities of economy saboteurs like foreign exchange speculators and money launderers.  The outright ban on the acceptance of foreign currency cash deposits by commercial banks by the CBN was to stem illicit financial flows. This followed the decision of commercial banks to either cap or ban such deposits a fortnight ago due to the unavailability of outlets that could absorb their cash. A circular by Olakanmi I. Gbadamosi, CBN Director of Trade and Exchange Department, said in a statement, “The Central Bank of Nigeria has considered the recent statements by Deposit Money Banks (DMB’s) concerning the large volume of foreign currencies in their vaults and the decision to stop accepting foreign currency cash deposits into customers’ domiciliary accounts as a welcome development. Therefore, in its continued efforts to stop illicit financial flows in the Nigerian banking system which aligns with the anti-money Laundering stance of the Federal Government, the CBN hereby prohibits from the date of this circular the acceptance of foreign currency cash deposits by DMBs. For foreign currency cash lodgements made prior to the date of this circular, the account holder has the option to either withdraw his or her foreign currency cash or the Naira equivalent. For the avoidance of doubt, only wire transfers to and from Domiciliary Accounts are henceforth permissible.”  A domiciliary account allows an individual or business to make transfers and save directly in British pounds, euro or dollars from within the Nigerian banking system. The move saw the NGN appreciate from 234 to 222 and was widely welcomed. The NGN has fallen from 200 to 234 in recent months (in line with other emerging market currencies, ZAR, MXN). As the largest economy in Africa the move could not have come at a better time as Pres. Buhari begins to implement wholesale changes in his government to clean up any dirty laundry.

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