Lukman Otunuga,
FXTM Research Analyst
It is coincidental how Nigeria’s
inflation rate accelerated in April, only a month after the central bank
unexpectedly reduced interest rates for the first time in more than three
years. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
With the impacts of the rate cut in
March having a delayed effect and unlikely to be reflected any time soon, the
13.7% rise in inflation was based around rising food prices. Should inflation
return with a vengeance in the coming months, businesses and consumers may feel
the heat – ultimately impacting economic growth. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html All in all, it remains too early to
come to any meaningful conclusion over whether inflation is set to rise, given
how this has been the first increase in three months.
The next major risk event for the
Nigerian economy will be the GDP report for Q1 which should offer critical
insight into the health of the nation during the first quarter of 2019. A
figure that exceeds the 2.1% year-over-year expectations should boost
confidence over the health of the Nigerian economy.
Markets influenced by ongoing trade tensions
Investor sentiment has swung back and
forth this week due to the persistent uncertainty and ever-changing jigsaw
puzzle that is being mapped out around global trade developments. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Stock markets were mostly mixed on
Thursday amid the contrasting signals that are being delivered to investors in
regards to US-China trade tensions. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html While there is hope on one side of the
table that there will be a handshake between the US and Chinese authorities at
the G20 next month to smoothen the recent escalation, this is being met with
news that the US government will ban Huawei's access to the US markets over
national security concerns.
The conflicting signals over trade are
likely to simply spark more uncertainty and confusion in the market, and
investors will continue to scatter and reassess their appetite towards taking
on risk as a result.
Market sentiment is poised to remain
fragile over the next month in the lead-up to the meeting between Presidents
Trump and Xi Jinping at the G20 summit late June. Will the world’s two largest
economies ever find a middle ground on trade or a tension destined to intensify
further throughout the year? http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html This is a question nobody has the
answer for. And this is why investors are nervous, especially following the
spectacular swerve that has occurred over the past two weeks.
Whatever the outcome of the hotly
anticipated Xi-Trump meeting, it will certainly have a lasting impact on market
sentiment for the second half of the year.
Euro unable to hang on to gains
Investors who were looking for a quick
opportunity to push the Euro higher were given the thumbs up yesterday
following reports that President Trump could delay auto tariffs by six months. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
However, the Euro’s upside gains are
limited with prices trading around the 1.12 level against the Dollar as of
writing. Even though the first estimates on the Eurozone and Germany’s Q1 GDP
prints met market expectations, the continent’s growth outlook is expected to
remain challenged by external factors in the form of trade tensions.
With the outlook for the Euro
fundamentally bearish amid growth concerns and the European Central Bank (ECB)
adopting a cautious stance, the EURUSD is positioned for further downside. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html A solid weekly close below the 1.120
level is likely to signal a move towards 1.113 and 1.100, respectively.
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Commodity spotlight - Gold
Disappointing economic data from the
United States and China added to the negative mood yesterday, which in turn was
a welcome development for safe-haven assets.
Gold bulls remain supported by trade
uncertainty and concerns over slowing economic growth and this continues to be
reflected in the metal’s valuation. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html Prices have the potential to test the
psychological $1300 level again in the coming days as market caution
accelerates the flight to safety.
Focusing on the technical picture, the
precious metal is bullish on the daily charts. A solid weekly close above $1300
should invite a move higher towards $1310 and $1324, respectively. With the
catalysts that can significantly reverse the ongoing flight-to-safety in the
near term being limited, Gold bulls remain in the driver’s seat.
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