WEEKAHEAD-AFRICA-FX-Dollar dearth weighs down Kenyan, Nigerian currencies - REUTERS
NAIROBI, July 23 (Reuters) - The Kenyan shilling and the Nigerian naira are expected to weaken in the week ahead, mainly because coronavirus disruptions have led to a dearth of dollars.
Nigeria's naira is expected to ease on the black market after the central bank sent it lower on the futures market last week, as dollar shortages crippled the economy, traders said.
The naira fell to 472 per dollar on the unofficial market on Thursday, weaker than the 388.36 on the over-the-counter spot market, widely quoted by investors and importers.
Dollar shortages have plagued the country for months after sharp falls in oil price, Nigeria's main export, shifting demand to the black market.
The central bank last week told lenders to stop processing new trade documents for maize imports to conserve reserves.
The Kenyan shilling is seen weakening further after this week hitting a record low because of dollar demand from importers after the state eased lockdown measures, traders said.
Commercial banks quoted the shilling at 108.15/35 per dollar, compared with 107.25/45 at last Thursday's close.
"We have opened up the economy but importers are finding it difficult because of the dollar supply crunch," said a senior trader from one commercial bank, referring to the lack of tourists and their dollars.
The Ugandan shilling is seen trading in a stable range due to inflows from non-governmental organisations and an excess liquidity mop-up by the central bank.
At 0948 GMT, commercial banks quoted the shilling at 3,695/3,705, compared with last Thursday's close of 3,690/3,700.
The shilling will likely trade in a narrow band around 3,700 in the comings days, said a trader at one of the commercial banks.
The Zambian kwacha is likely to hold within the same range against the dollar next week, supported by hard currency sales by firms to meet their month-end obligations.
On Thursday, commercial banks quoted the currency of Africa's second largest copper producer at 18.1250 per dollar, from 18.2320 at close of trading a week ago.
"It should continue trading largely the same with support from dollar conversions as companies prepare to pay salaries and other month-end dues," one commercial bank trader said.
Tanzania's Shilling is expected to hold steady next week due to a balanced supply and demand of dollars in the market.
Commercial banks quoted the Shilling at 2,314/2,324 on Thursday, compared with 2,312/2,320 a week earlier.
"We expect the Shilling to continue remaining stable next week due to the contribution of inflows from mining and commodities," said a senior trader in a commercial bank. (Reporting by John Ndiso, Chijioke Ohuocha, Elias Biryabarema, Chris Mfula and Nuzulack Dausen; Editing by Duncan Miriri and Barbara Lewis)
Sterling steady above $1.27 on last day of Brexit talks - REUTERS
BY Olga Cotaga
Sterling stabilized above $1.27 on Thursday on the last day of the Brexit negotiations, with traders looking out for any headlines that may shine some light on whether Britain could walk away from the European Union with a deal at the end of the year.
Media reports suggested the United Kingdon has given up hope on reaching a deal so investors should “watch the tone of the statements coming out of today’s final meetings to see if they are of a conciliatory or confrontational nature,” said Marshal Gittler, head of investment research at BDSwiss Group.
Overnight implied volatility gauges showed traders were slightly nervous about possible emerging headlines on Thursday as levels inched to a one-month high of 8.85%.
The pound was down 0.1% at $1.2716 and down 0.2% versus the euro at 91.02.
Leveraged funds were shorting the British currency as of last Tuesday, but they had cut their positions in the last few weeks to hold just above $1 billion in shorts, according to latest CFTC data.
Sterling hit by Barnier's gloomy view on Brexit talks - REUTERS
Sterling fell on Thursday after the European Union’s chief Brexit negotiator said that the UK had shown no willingness to break the deadlock on talks over a new trade agreement.
Speaking after this week’s round of negotiations in London, Michel Barnier said there has been no progress at all on the question of ensuring fairness on state aid.
“Sterling’s slump after Michel Barnier’s comments should come as no surprise as headlines reinforce how far both sides are away from a comprehensive free trade agreement,” said Simon Harvey, currency analyst at broker Monex Europe.
“The game of brinkmanship is likely to continue throughout Q3 and into Q4 in our opinion, resulting in only one certainty: an increase in sterling volatility to levels seen previously when the risk of a hard Brexit increased.”
The pound was down 0.3% at $1.2605 GBP=D3 and at 91.06 pence against the euro EURGBP=D3.
Overnight implied volatility gauges were elevated in the early European trading session, suggesting traders were nervous about emerging Brexit headlines on the last day of Brexit negotiations for the summer. Volatility levels earlier edged to a one-month high of 8.85%. GBPONO=FN
Leveraged funds were shorting the British currency up to July 14, though they have cut their positions in the past few weeks to hold a little more than $1 billion in shorts, the latest CFTC data shows. GBPNETUSD=
Graphic - Overnight vols rise to 1-month high - here In other news, Bank of England interest rate setter Jonathan Haskel said he was worried that Britain's economic recovery from the coronavirus crisis could be slow, signalling his willingness to support more stimulus.
Executive Order on Ease of Doing Business in Nigeria: Knuckling Down to Get Business Done - LEXOLOGY
President Buhari’s administration is on record as being the first to consciously determine to address Nigeria’s perennially low ranking in global ease of doing business (EDB)/ competitive ratings, acknowledging inevitability of taking composite reform actions to significantly improve Nigeria’s EDB rankings. This is commendable, given anxieties caused by the President’s five month delay in constituting his cabinet, inclement global and national macro-economic landscape headlined by shrinking government revenues from falling crude prices and production cuts as a result of unrest in the Niger Delta, as well as policy actions or inactions that put pressure on Nigeria’s foreign exchange metrics. Little wonder that Nigeria’s EDB rating actually slipped in 2016 from 2015, after marginally improving in 2014.
In pursuance of the declared goal to improve Nigeria’s EDB ratings, the President inaugurated the Presidential Enabling Business Environment Council (PEBEC), chaired by the Vice President, in July 2016. PEBEC comprises the Minister of Industry, Trade and Investment (MITI) as Vice-Chair, 9 other ministers, the Head of Service of the Federation, Governor of the Central Bank, representatives of the National Assembly, and the private sector. PEBEC’s mandate is to make recommendations on institutional reforms to promote Nigeria’s investment attractiveness. In February 2017, PEBEC approved a 60-Day National Action Plan “with clear deliverables and timelines for [MDAs] responsible for implementing each line item in the Plan.”
On 18th May 2017, the Acting President issued three Executive Orders (EOs); effective immediately and targeting public service improvements to touch every sphere of Nigeria’s economy. In this Newsletter, we discuss one of the EOs (and which appear to build on PEBEC’s work), the 26 paragraph Executive Order On the Promotion of Transparency and Efficiency in the Business Environment with its attendant implications on businesses and investors in Nigeria.
1.1 Constitutionality and Use of EOs
EOs essentially are a set of commands directly given by the President to an executive agency, class of persons or body under the executive arm of government. Apparently the instant EOs would not be the first to be issued in Nigeria (examples would be presidential powers exercised pursuant to delegated legislation), but have attracted attention because of their significance and also given our 21st century realities that have basically democratised news media access. They also signal intent to more actively use EOs by the Buhari administration going forward, as a veritable means of championing and instilling reform, short of legislative process which typically takes longer time frames. Clearly, there is so much to do in so little time - the President’s current tenure expires in 2019. Across the Atlantic, as at May 2017, USA’s President Trump has signed 36 EOs since his assumption of office in January, 2017. So it is possible that we will see many more “paradigm shift, game changing” EOs from the Buhari administration.
Irrespective of views whether Nigerian Presidents should use EOs in directing the policy of the Federal Government, such acts are constitutionally sanctioned - as exercise of inherent executive powers conferred on the President. Furthermore, section 315(2) 1999 Constitution (as amended) provides: “the appropriate authority [President or Governor] may at any time by order make such modification in the text of any existing law as the appropriate authority considers necessary or expedient to bring that law into conformity with the provisions of this Constitution.” Since the President is the Chief Executive of the Federation, it behoves him to exercise functions of his office to drive policy direction, especially to give full effect to laws already in place or their amendment to ensure fulfilment of electoral promises. As mentioned previously, it is desirable that the President from time to time issue EOs to steer economic policies which promotes investment in Nigeria.
2.1 Promotion of Transparency and Efficiency in the Business Environment
This EO is particularly focused on improving Nigeria’s EDB through transparent and efficient service delivery by various government Ministries, Department and Agencies (MDAs). To promote transparency in MDAs’ dealings, the EO makes it mandatory for them to make public all the requirements for licence, permits, waivers, approvals and tax related information.
Pursuant to the EO, every MDA must ensure that its fees, timelines and other deliverables it owes applicants are published within its premises and regularly updated on their websites. This is a welcome departure from common situations where applicants faced uphill task accessing information on regulatory processes and requirements for permits, licenses and approvals. The sense of frustration encountered by applicants was a ready excuse for corruption in order to remove ‘intentional’ bottlenecks. With the envisaged transparency, the cover would be blown for public servants who had a penchant for stalling processes so they could “offer to help” in exchange for bribes. The EO puts added pressure on regulators - especially business facing ones (needing to approve new products, or transactions) and whose enabling law actually prescribes timeline for granting approvals, but who observe same in breach, rather than in compliance. It also sends a signal that such historic defaults will no longer be tolerated.
One of its key elements is resolving any conflict on fees or procedure in favour of the application where an applicant has relied on published requirements by the MDAs – per paragraph 2 of the EO. Applicants are entitled to rely on published requirements in their applications; where there is discrepancy between the MDA’s actual practice and any published list relied upon by the applicant, the latter would prevail.
Timelines and deliverables would provide basis for measuring MDAs’ performance and will instil a sense of ‘ownership’ in public servants, and resultant productivity. A colleague shared news of how he just collected a driver’s license he applied for in 2013 in June 2017, albeit the license will expire in August 2017! Another area that the government could look at is the duration of permits and licenses. Given the stresses associated with obtaining driver’s license and international passports, it is the height of inefficiency for them to have three (3) and five (5) year durations respectively. Extending their validity to say ten (10) years for example, means there would be less pressure with dealing with incessant renewal applications.
While public servants may be regarded as ‘having nowhere to hide’ – since the EO compels MDAs to comply upon pain of sanctions, the ultimate effectiveness would also be a result of active citizens’ engagement in demanding compliance with the EOs in their interaction with MDAs.
2.1.2 Default Approval
Another striking development is “default approvals”. Paragraph 3 of the EO provides that: “where the relevant agency or official fails to communicate approval or rejection of an application within the time stipulated in the published list, all applications for business registrations, certification, waivers, licenses or permits not concluded within the stipulated timeline shall be deemed approved and granted.” This provision’s strong potential to de-incentivise undue regulatory delays means that such would no longer be a drag on the pace of business transactions.
In a default approval scenario, the applicant may within fourteen (14) days of the lapse of the MDA’s stipulated timeline to grant the approval, make an application to the relevant supervising Minister for the issuance of any necessary certificate or document to evidence such approval.
The EO is however silent on the procedure for making such application and its supporting documentation. It follows that such applicant desirous of formalising the grant would forward an application showing that the relevant MDA’s requirements have been met and timeline has lapsed including any document submitted in the application to the MDA. One of the blind spots in the EO which needs emphasis is the position of an applicant where the Minister declines to ‘formalise’ a deemed grant. Paragraph 8 of the EO, “an Applicant whose application is deemed granted under this Directive may apply to the Minister for the time being in charge of the application for the issuance of any document or certificate in evidence of the grant within 14 days of lapse of the MDA’s stipulated timeline for the application” presupposes that such an application to the Minister would be discretionary. It is however safe to assume that no reasonable applicant (that had invested resources in making the regulatory application) will fail to take the next step to obtain ministerial approval to regularise the default approval.
Can the Minister refuse to issue a certificate to evidence the deemed grant? The answer would appear to be in the negative, unless the application is patently unmeritorious, given the presumptive intent of the EO.
Another critical issue is the status of regulatory applications predating issuance of the EO. Do they also enjoy the benefit of default approval? Regrettably, applications made prior the issuance of the EO would not enjoy the benefit of a deemed grant – otherwise the EO could become objectionable for being retroactive. However, same is unlikely to be challenged – not by public servants being enjoined to deliver improved services or applicants who are meant to be beneficiaries of the EO. Nonetheless, given that the EO itself has an effective date of 18th May 2017, it would have been helpful to have transitional provisions to deal with prior regulatory applications.
2.1.3 One Government
Another important aspect of the EO is the reiteration of singularity of government MDAs. Thus, where an application to any MDA requires a supporting documentation issued (or to be issued) by another MDA, the onus of verification or certification lies with the MDA processing the application: a photocopy or any other prima facie proof would suffice for such application. Such inter-MDA interface will likely speed up approval processes and also reduce the applicant bearing the burden of regulatory delay of an MDA to jeopardise the prospect or timeliness of its current application before another MDA. Furthermore, MDAs can - unless put on their enquiry by any untoward occurrence rely on the presumption of regularity - rely on documents purportedly issued by sister MDAs. One of the requirements for a government bid is the submission of original copy of bidder’s Tax Clearance Certificate (TCC). The implication of this is that photocopy of bidder’s TCC would suffice for the bid without the need for verification of such TCC.
Also, MDAs are required to publish their Service Level Agreements (SLAs) regulating their service delivery to third parties. These SLAs are particularly important as they stipulate the timeline for application and issuance of licence, certificates, waivers, business registration or permits. The EO further reiterates the bindingness of such SLA while reposing the responsibility of adherence to the head of such MDAs. It is hoped that these SLAs would be implemented with lessons learnt from the pitfalls suffered by SERVICOM established by President Olusegun Obasanjo in 2004. Despite the reports from the public on poor service delivery by MDAs – untreated/missing files, corruption, inefficiency to mention a few - to SERVICOM, no major corrective or disciplinary actions were taken against erring civil servants to produce envisaged culture shift.
2.1.4 Fast-Track Visa Application / Visa on Arrival
Pursuant to paragraph 14 of the EO, ordinary tourist and business entry visas to Nigeria shall be issued or rejected with reason within 48 hours. Arguably, where no response is received from the issuing Embassy or High Commission within 48 hours, such visa application shall be deemed granted (pursuant to paragraph 3).Alternatively, applicants may seek to obtain their visas at any port of entry under the visa on arrival policy and must be issued with a valid visa upon meeting all the published requirements for a grant as stipulated under paragraphs 15 and 16 of the EO.
No doubt, this is a revolutionary shift from what was obtainable previously, as it would further make Nigeria an attractive travel destination for tourists and investors. Needless to say, the airports being investors and tourists’ first point of contact with Nigeria ought to have a welcoming ambience. News that Lagos State Government will soon start rebuilding the expressway to Murtala Mohammed International Airport cannot but be welcoming news, much as the decrepit on condition of the roads leading to Apapa ports – Nigeria’s premier port - is a huge let down.
2.1.5 Port Operations
The ports plays a critical role in Nigeria’s economy and their historic sub-optimality has resulted in massive loss of revenues (e.g. on goods diverted to neighbouring West African ports but would end up being smuggled into, and consumed in Nigeria). Users of the ports have faced various challenges in the past ranging from congestion, delayed cargo clearance, touting, uncoordinated actions of duplicative agencies, amongst others. To ameliorate these challenges faced by users, the EO prohibits any form of touting by official or unofficial persons while allowing only on-duty staff, and except with the permission of the head of the agency, an off-duty staff at the ports. This is to enhance proper identification of officials on duty and any form of solicitation could be reported to appropriate authority.
To ease operations at the ports, all MDAs are required to make arrangements to merge into a single customer interface, making them customer/investor/tourist friendly while taking account of inflow and outflow data which would be sent to the National Bureau of Statistics (NBS). By implication, time spent undergoing numerous checks at the ports would be significantly reduced. More so, the port operation is to run on a 24 hour circle paving way for increased commercial activities, given the EO’s prescription for 48 hour cargo clearance timeline.
2.1.6 Business Registration
The Corporate Affairs Commission (CAC) charged with incorporation of companies and business registration is to ensure that all registration processes including search, filings and payment are fully automated. Prior the issuance of the EO, the MITI had amended the Companies Regulations 2012 so that CAC can decide on name reservation applications within 12 hours of submission, whilst registration of companies, business name and incorporated trustees shall be within 24 hours from submission of completed forms. Previously cumbersome incorporation forms were replaced with a single form CAC 1.1 (Regulation 3). In the same vein, under Regulation 11, options for submission of forms to the CAC have now been expanded to include online submission through its website. Statutory Declaration of Compliance required for incorporating companies which was solely the exclusive preserve of lawyers are now deposed to by CAC’s in-house lawyers, thereby reducing the compliance burden of incorporation.
These innovations should fast track the incorporation process, by obviating hitherto incessant queries. There is greater flexibility as applications can be done anywhere in the world without the need to physically visit CAC’s offices – except to collect original copies of the registration certificate at the designated pick up point. In the future, it should be possible for CAC clients to download and print incorporation certificates or CTCs of corporate filings, upon logging in to CAC’s website. The CAC however, must build its capacity to attend to numerous applications filed on a daily basis. Premium should also be placed on security of its system and routine vulnerability checks.
We hope the EO will signpost similar efforts by the States, as the instant EO provisions are only binding on Federal MDAs. Faithful implementation and adherence to the EOs should improve Nigeria’s investment competitiveness and EDB ratings, but such improvement would be more substantial if all States were to issue similar EOs in respect of regulatory processes under their remit. And this is not to say that some States have not been a purveyor of reforms. Lagos State, the nation’s economic heartbeat, reformed its justice sector and property registration regime to popular acclaim, including digitalising its property records. Lagos also made provision for limited partnerships and limited liability partnerships to widen the options for business vehicles, exemplifying a healthy regulatory competition amongst States in Nigeria.
But there is more to be done. Real estate reform – to optimise ease of acquisition, registration, disposal, secured lending, building approvals, etc across all the States will have dramatic improvement in Nigeria’s competitiveness rating. Real estate is also illustrative of how the Federal and State Governments should collaborate to drive efficiencies that will not only benefit the economy generally (financial services, agriculture, employment, etc.), but help accelerate the bridging of the housing deficit. One further point is that policy actions like EOs should have measurable benchmarks like the ones issued by the Federal Government - these would challenge the public service to pull their weight as everyone realises that non-compliance will raise a red flag and risk exposure to sanctions.
As someone said, eternal vigilance is the price of liberty. Strict implementation of the EOs is therefore key, and it is gratifying that the EO stipulates mechanisms and review timelines in this regard. Anyone in doubt should check BusinessDay’s front page headline on Thursday 8th June 2017: “Executive Order: NPA Re-expels Seven Agencies from Ports”. These agencies whose presence constituted an overhang of MDAs at the ports, had been expelled by presidential directive under the Jonathan administration (October, 2011), but somehow found their way back (or maybe never left the ports)!
The MITI has described itself as the “Ministry of Enabling Environment”. This would be an appellation well deserved if Nigeria were to leapfrog to the top 10s of global/African EDB rankings by 2019 as envisioned by the Buhari administration and driven by PEBEC.
U.S. dollar continues slide as euro soars again - REUTERS
BY Chuck Mikolajczak
NEW YORK (Reuters) - The dollar slumped to its lowest in nearly two years on Thursday, as investors continued to sell the greenback on expectations a surge in coronavirus cases will make it difficult for the U.S. economy to outperform its peers.
By contrast, the euro rose to its highest since early October 2018 after breaching the technically important $1.16 level on Wednesday and was up for a fifth straight day against the dollar, still basking in the glow of the European recovery fund approved earlier this week.
“Speculators are pretty underweight a lot of the G10 currencies so there is room for this momentum move to keep going,” said Erik Nelson, currency strategist at Wells Fargo Securities in New York.
“The biggest risk that it stops and the dollar starts to regain its legs is equities, if the equity rally really starts to falter and we see a big move lower then all of a sudden dollar strength is going to come back very quickly.”
A rise in U.S. jobless claims last week, for the first time in four months, also added to pressure on the dollar, as a persistent increase in COVID-19 cases has put an apparent recovery in the labor market on stall speed and dampened consumer demand.
Graphic: Dollar's performance in 2020 - here
U.S. coronavirus cases topped 4 million on Thursday, with over 2,600 new cases every hour on average, the highest rate in the world, according to a Reuters tally.
In afternoon trading, the dollar index was down 0.3% at 94.725 =USD, after hitting its lowest since late September 2018. It has lost nearly 8% since its March 20 peak, when a global dollar funding crunch saw a surge in demand. The index is down 1.3% on the week and on pace for its fifth straight weekly decline.
The dollar briefly strengthened after U.S. Treasury Secretary Steven Mnuchin said the U.S. government will protect the stability of the currency. White House officials and U.S. Senate Republican leaders also continued to work towards a proposal for a new round of aid to buttress the economy.
Against the Japanese yen, the dollar was down 0.37% at 106.75 yen JPY=EBS.
The U.S. currency was also down 0.46% against the Swiss franc at 0.9252 franc CHF=EBS. Earlier it dropped to a more than four-month low.
The euro EUR=EBS was up 0.34% at $1.1609, hitting a fresh 21-month high of $1.1601 hit earlier on Wednesday.
The Australian dollar AUD=D3 retreated from a 15-month peak against the greenback to around US$0.7107, down 0.46%, while the New Zealand dollar NZD=D3 fell 0.41% to US$0.6636, below Wednesday's six-month top of US$0.6678.
Elsewhere, China's offshore yuan recovered losses somewhat from an earlier slide against the U.S. dollar, which was last down 0.1% at 7.0113 yuan CNH=EBS.
China said the U.S. move on Tuesday to close its Houston consulate this week had “severely harmed” relations and warned it “must” retaliate, without further details.
Reporting by Chuck Mikolajczak; Editing by Tom Brown
Nigerian govt gives update on resumption of international flight - DAILY POST
Mr. Boss Mustapha, Secretary to the Government of the Federation and Chairman, PTF-COVID-19, has called on Nigerians to disregard any “fake news” making the rounds, as the aviation sector was working out a protocol to resume international flight.
Mustapha, stated this at the daily briefing of the Presidential Task Force on COVID-19, on Thursday in Abuja.
Recall that the Minister of Aviation, Sen. Hadi Sirika, had said that no resumption date was announced for international flight operations.
He urged Nigerians to be patient and await the real date for resumption of international flights as no date has been fixed yet.
According to him, “the aviation sector has been working assiduously to develop the protocols for the resumption of international air services.
“The PTF remains conscious of the significant contributions of air travels to economic growth and shall continue to push for a safe resumption.
“The next phase is for aviation regulators to engage with stakeholders to facilitate an integrated and seamless resumption of international flights.
”I plead with all Nigerians to await the authentic information from the aviation authorities, discountenance fake news and speculation on dates,” Mustapha said.
However, there were reports that the Nigerian Civil Aviation Authority (NCAA) had selected Oct. 15, as the resumption date for international flights.
Reacting, the Minister said that the Nigeria Airspace Management Agency (NAMA), only issued a routine 90-day notice to airmen (NOTAM).
According to him, “international flight resumption date is not October. NAMA just issued a routine 90-day notice to airmen (NOTAM).
“In liaison with the Health, Foreign Affairs & PTF COVID-19 (groups), we will announce the agreed date, regardless of the ban by Europe and UAE, maybe earlier than October,” Sirika said
Sterling benefits from dollar weakness but hurdles loom - REUTERS
LONDON (Reuters) - Sterling advanced on Tuesday thanks to a deepening dollar rout though concerns of a second wave of virus infections and a central bank policy meeting later this week capped gains.
The pound has reversed nearly all the losses sustained against the dollar in the wake of the pandemic-fueled selloff in March and April and was rising on Tuesday towards a five-month high hit last week versus the greenback.
Sterling’s recovery has been impressive in recent weeks. It registered its biggest monthly rise in more than a decade in July even though prospects of a breakthrough in Brexit negotiations with Europe before a December deadline remain elusive.
“I think it’s more a case of the dollar giving back some of the gains we’ve seen over the last couple of trading sessions,” said Lee Hardman, a currency strategist at MUFG in London.
“That downward pressure on the dollar is resuming partly because of the (Federal Reserve Bank’s) response to the coronavirus.”
On Tuesday, the pound rose 0.05% to $1.3085 against the dollar and strengthened 0.12% against the European Union’s common currency to 90.09 pence.
Signs that dollar weakness have been the major driver of pound gains can be seen from the performance of the British currency versus the euro and the Japanese yen.
While it has strengthened nearly 15% versus the greenback since the March lows, it has risen less than 6% against the euro and less than 12% versus the yen in the same period.
The pound also faces headwinds from domestic factors as well as global forces.
British Prime Minister Boris Johnson said last week he would postpone the next stage of lockdown easing for at least two weeks due to a pick-up in COVID-19 infection rates.
In the United States, Democrats in the U.S. Congress and White House negotiators are in talks on a new coronavirus relief bill after a deadline was missed on Friday to extend enhanced unemployment payments during the pandemic.
Any delay in unveiling more stimulus measures would fuel another round of selling in risky assets and drag the pound lower.
Investors are also awaiting the Bank of England’s policy meeting on Thursday where money markets are already pricing in the prospects of negative interest rates by early next year.
Reporting by Maiya Keidan and Saikat Chatterjee. Editing by Carmel Crimmins
Oil gains as COVID-19 vaccine hopes outweigh weak fuel demand outlook - REUTERS
By Sonali Paul, Seng Li Peng
MELBOURNE/SINGAPORE (Reuters) - Oil prices rose on Tuesday as high hopes that a COVID-19 vaccine could be on the horizon were enough to cancel out fears that fuel demand is set to weaken in the near term in coronavirus-hit countries in Europe and the United States.
U.S. West Texas Intermediate (WTI) crude CLc1 futures edged up 16 cents, or 0.4%, to $40.45 a barrel by 0805 GMT, while Brent crude LCOc1 futures rose 9 cents, or 0.2%, to $42.49.
Both benchmark contracts jumped 8% on Monday, in their biggest daily gains in more than five months, after drugmakers Pfizer PFE.N and BioNTech 22UAy.F said an experimental COVID-19 treatment was more than 90% effective based on initial trial results. Mass rollouts, however, are likely months away and subject to regulatory approvals.
“A viable vaccine is unequivocally game-changing for oil - a market where half of demand comes from moving people and things around,” JP Morgan said in a note
“But as we have written previously, oil is a spot asset that must first clear current supply and demand imbalances before one-to-two-year out prices can rise.”
Rystad Energy said lockdowns in Europe could result in the loss of a further 1 million barrels per day of oil demand by the end of this year.
“The fast-tracking of multiple vaccines doesn’t mitigate the risk that many U.S. states will have to return to some form of lockdown this autumn/winter,” Rystad Energy’s head of oil markets Bjornar Tonhaugen said.
U.S. oil inventory numbers are due on Tuesday from the American Petroleum Institute, and on Wednesday from the Energy Information Administration.
Five analysts polled by Reuters estimated, on average, that U.S. crude stockpiles fell by 1.3 million barrels in the week to Nov. 6.
Tuesday’s oil price decline was tempered by comments from Saudi Arabia’s energy minister, who said on Monday the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, could tweak their supply cut pact if demand slumps before the vaccine is available.
OPEC+ agreed to cut supply by 7.7 million barrels per day from August through December and then ease the cut to 5.7 million bpd from January.
“If the oil market continues to rally between now and the OPEC+ meeting at the end of the month, it could prove self-defeating, as some members may grow more reluctant to roll over current cuts into next year, leaving the market vulnerable over the first quarter of next year,” ING economists said in a note.
Reporting by Sonali Paul and Seng Li Peng; Editing by Kenneth Maxwell and Kim Coghill