Nigeria FX traders await U.S inflation data, as naira hit an all-time low

The US dollar maintained a steady position, hovering close to a two-week low following the release of minutes from the Federal Reserve’s recent meeting. The minutes revealed a cautious stance among policymakers, contributing to uncertainty in the market.

Key Highlights:

  1. Fed’s Cautious Stance: The Federal Reserve’s minutes indicated a cautious approach, emphasizing the need for careful consideration in determining further policy tightening.
  2. Dollar Index: The dollar index, measuring the currency against six rivals, stood at 105.64, near its recent low. The cautious sentiment is evident in the market as investors await crucial US inflation data.
  3. Naira’s Decline: The naira faced continued decline in the parallel market, reaching N1045/$, driven by growing scarcity. The currency has depreciated over 40% against the US dollar since the mid-June devaluation.
  4. US Inflation Data: Investors are eagerly awaiting the release of US Consumer Price Index data for September, expected to provide insights into inflation trends. The outcome may influence market expectations regarding the Federal Reserve’s future actions.
  5. Market Uncertainties: The financial market faces uncertainties, with Fed officials highlighting economic uncertainties, oil prices, and market dynamics. Rising bond rates are considered a factor that may influence the decision on further rate hikes.
  6. FedWatch Tool: The CME FedWatch tool indicates market expectations, with a 26% chance of a 25-basis point hike in December and a 9% chance in November.
  7. Dollar’s Recent Weakness: The recent weakness in the dollar is attributed to falling Treasury yields, aligning with the Federal Reserve’s cautious stance on future rate hikes.
  8. US Economic Resilience: Despite Fitch’s downgrade of the US credit rating, the US economy has demonstrated resilience, contributing to the recovery of the US dollar.
  9. Interest Rate Outlook: Interest rates were maintained at their highest level in 22 years during the recent Federal Reserve meeting, with expectations of a gradual rate reduction between 2024 and 2025.

Market Outlook:

The market remains cautious, awaiting key economic indicators to gauge the trajectory of the US dollar. The impact of inflation data and the Federal Reserve’s future decisions will likely influence market dynamics in the coming weeks.