Cedi strengthens against major currencies on FX liquidity surge

In a recent update, GCB Capital Research sheds light on the resilient performance of the Cedi against major trading currencies, attributing its strengthened position to an infusion of foreign exchange (FX) liquidity prompted by the latest actions of the Monetary Policy Committee.

The report highlights a significant alleviation of seasonality-induced FX liquidity pressures that had constrained the Cedi’s performance since the commencement of Q4 2023. The Cedi last week witnessed a turnaround, with the local currency registering week-on-week gains against the three principal trading currencies. The Cedi closed the trading week with appreciations of 0.4%, 2.7%, and 0.7% against the USD, Euro, and GBP, respectively.

GCB Capital Research emphasizes that the FX liquidity boost following the November 2023 monetary policy decision reflects an improvement in liquidity conditions within the market. The report anticipates continued positive momentum, with the government’s efforts to finalize a Memorandum of Understanding (MOU) with Official Creditors by year-end, the imminent cocoa loan, and the expected release of the second tranche under the IMF program.

Looking ahead to 2024, the report suggests that the Cedi could commence the year with a robust liquidity cushion. Coupled with an ongoing disinflation process, sustained reforms, and external debt management initiatives, the market sentiments are expected to remain optimistic.

This analysis from GCB Capital Research paints a positive outlook for the Cedi, underscoring the interconnected factors influencing its current resilience and anticipating a favorable trajectory into the coming year.