Thursday, 20 December 2018


The Naira remained flat against the Dollar today despite the Federal Reserve surprising markets with a hawkish US interest rate increase yesterday evening.

It is becoming clear that the Naira’s stability is the product of repeated intervention by the Central Bank of Nigeria. While the local currency’s resilience looks encouraging, falling Oil prices are seen complicating the CBN’s effort to defend the Naira. With heavily depressed Oil prices denting government revenues and reducing foreign exchange reserves, the local currency remains vulnerable ahead of the new year.

Hawkish Fed hike crush hopes of Santa rally
The last shred of hope over the possibility of a Santa Clause rally was crushed by the Federal Reserve’s hawkish rate hike on Wednesday.

Global equity markets were under intense selling pressure after the Fed sounded less dovish than expected. Although a rate hike in December was already heavily priced in by markets, investors who were looking for a ‘one and done’ statement were highly disappointed after the Fed flagged ‘some further gradual increases’ on rates are still on the cards. While the lower revision of the dot plot from three to two rate hikes in 2019 offered a dovish touch, the overall tone of the statement coupled with Fed Reserve Chair Jerome Powell’s press conference were hawkish.

Market players were looking for reassurance from the Fed as the year slowly comes to an end, but it seems that that opposite has been achieved with uncertainty in the air.  With the Federal Reserve leaving the doors open to further rate hikes despite turbulent market conditions, market sentiment is poised to remain cautious for the rest of 2018. Powell’s hawkish comments during his press conference compounded to the uncertainty and confusion, especially when considering how he was dovish some weeks ago. In regards to the technical picture, the Dollar Index is seen attacking 96.00 if bears are able to break below 96.40.

Commodity spotlight – Gold
Gold prices were thrown onto a rollercoaster ride mid-week after the Federal Reserve’s less dovish than expected tone caught investors by surprise.

Buying sentiment towards the Dollar initially received a boost following the interest rate hike but gains were later surrendered thanks to growth concerns. With risk aversion boosting appetite for safe-haven assets and the Dollar struggling to benefit, Gold has the potential to shine into 2019. Focusing on the technical picture, the yellow metal is bullish on the daily charts as there have been consistently higher highs and higher lows. A decisive breakout above $1,250.70 is seen opening a path towards $1,260.

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