Nigerian markets await FOMC's decision

Nigerian markets are on edge as the Federal Open Market Committee (FOMC) is set to announce its interest rate decision today. The uncertainty surrounding a dovish or hawkish stance from the US FOMC has left traders speculating on the potential impact on the market. Nkechi Ezugha, a Forex Trader at UBA, provided insights on the possible outcomes of the FOMC decision and its implications for the global economy. Amidst global growth concerns and lackluster macroeconomic data in the US, including inflation below 2% and unfavorable unemployment rates, the FOMC has indicated a reluctance to hike rates this year. However, the ongoing trade tensions between the US and China add another layer of uncertainty for policy makers. The market is eagerly awaiting the FOMC's forward guidance, as it will be influenced by a multitude of factors, including the stability of the US economy and the impact of trade tensions. Turning to the Nigerian market, the absence of Open Market Operations (OMO) auctions since last week has led to a surge in demand on the longer end of the curve. Market players who missed out on the last Primary Market Auction (PMA) have shifted to the secondary market to cover their positions, causing a mix of buying and selling activities. While the fixed income space has seen heightened activity, the bond market remains relatively quiet with sporadic movements in certain maturities. Speculations regarding potential interest rate cuts by the Central Bank of Nigeria (CBN) have sparked concerns among market participants, who fear a drop to single-digit rates. Ezugha reassured that while a downward adjustment in interest rates is possible, it is unlikely to reach single-digit levels in the long term. Support levels are expected to remain around 11.5% at the long end, with a slight decrease to 10% or 9.8% at the short end. Market players are strategically positioning themselves amidst the evolving market dynamics. In the Foreign Exchange (FX) market, the Naira has remained stable against the US dollar, with excess supply of dollars easing demand pressures. The Central Bank's interventions, including injecting $110 million last week and ongoing retail interventions, have helped maintain stability in the exchange rate, hovering around 359-360 levels. Despite muted demand in recent days, the market is closely monitoring any potential shifts in FX dynamics. As the FOMC prepares to announce its decision, Nigerian markets remain cautious, bracing for potential reverberations from the global stage. The interplay between international economic developments and domestic market conditions continues to shape trading activities in the country.