The Nigerian Naira commenced Thursday's trading session at its lower exchange rate against the British Pound Sterling, rapidly exceeding N2,000. Simultaneously, the Pound Sterling reached a four-month high against the US Dollar, fueled by data revealing stronger-than-anticipated UK economic growth in May, thus diminishing the likelihood of an August interest rate reduction. 

The Office for National Statistics released preliminary data on Thursday, indicating a 0.4% expansion of the UK economy in May. This announcement contributed to the Pound Sterling achieving its four-month peak against the US Dollar.

In the parallel market, the pound sterling was valued at N2,020 against the naira, despite favorable conditions for Nigeria’s foreign exchange assets managed by the Central Bank of Nigeria (CBN). The naira's depreciation occurs alongside Nigeria's reserves, which stood at $35.05 billion as of July 8, 2024, marking the highest level during President Tinubu’s tenure.

The naira's decline in the Nigerian Autonomous Foreign Exchange Market (NAFEM) was accompanied by increased price volatility and a growing disparity in exchange rates. The currency fell by N29, trading at N1,561/$1 late Wednesday, down from N1,532/$1 the previous day, according to NAFEM data.

The British economy showed a strong recovery from a brief recession in the first quarter, although it faced stagnation in April. Growth in May was bolstered by a 1.9% increase in construction and a 0.2% rise in production, while the services sector, the largest in the UK, continued to grow at a rate of 0.3%.

As reported by LSEG, the British pound appreciated by 0.05% against the US dollar, reaching $1.2859 by 7:17 a.m. in London, the highest level since March 8, 2024. With Prime Minister Keir Starmer beginning his first week in office, the newly elected Labour Party is anticipated to manage a thriving economy.

A significant parliamentary majority and pro-business language from the Labour Party have led analysts to perceive the government as supportive of UK-based investments. Market expectations suggest that the Labour administration will focus on implementing impactful, cost-effective policies to stimulate essential private investment, in line with recent commitments to economic growth amidst constrained public finances.

Recently, Finance Minister Rachel Reeves revealed intentions to amend planning regulations, lift the ban on new onshore wind farms in England, and set mandatory housing construction targets. Additionally, she announced the creation of a £7.3 billion national wealth fund aimed at drawing private sector investment for infrastructure initiatives in the UK.

Currency market analysts are closely monitoring the British pound for indications of weakening upward momentum in the coming weeks. A price correction downwards would likely limit rallies below $1.2857. A substantial decline would necessitate a close below the weekly opening price.

Initial support levels are identified at the 2024 yearly opening price of $1.2731 against the safe-haven currency, and the February 2019 swing low of $1.2773. Price pullbacks must remain above this level to sustain the month's upward trend. The overall bullish invalidation point has been revised to $1.2664, the July opening price.