The
upcoming trading week will offer investors fresh insight into the health of
Nigeria’s economy, with both the interest rate decision and GDP data scheduled
for release. Further signs that Africa’s largest economy is building momentum
will not only support bullish sentiment, but will also boost expectations of
the Central Bank of Nigeria cutting interest rates in H2. The IMF has predicted
Nigeria will grow at 2.1% in 2018 and it will be interesting to see if the
nation is able to exceed this projection.
Carney strikes
down hawks, Lira trades sideways
Buying
sentiment towards the British Pound deteriorated sharply yesterday, after
dovish comments from Bank of England’s Governor Mark Carney heavily diluted
expectations of an interest rate hike in May.
Carney’s
cautious tone and his acknowledgement of recent “mixed” economic data, planted
a seed of doubt among investors that the central bank will take action next
month. With inflation cooling, retail sales disappointing and a dovish Carney
entering the scene, Sterling bulls could be in trouble. The probability of a
rate hike in May plunged to below 50% (down from 70% before Carney spoke) and
this continues to punish the currency.
Sensitivity
to monetary policy speculation is likely to remain a key fundamental theme
impacting the British Pound. If market expectations continue to deteriorate
over higher U.K interest rates, Sterling could be exposed to further downside
risks.
Taking
a look at the technical picture, this has been a terribly bearish week for the
GBPUSD, with prices trading around 1.4060 as of writing. Previous support at
1.4100 could transform into a dynamic resistance that encourages a decline
lower towards 1.4000. If bulls are able to push prices back above 1.4100, the
next key level of interest will be 1.4230.
Turkish Lira
takes a breather
It has
certainly been a positive trading week for the Lira, as a surprise announcement
of snap elections in Turkey boosted appetite for the currency.
President
Tayyip Erdogan called an early election for 24 June, creating a sense of
optimism among investors that political stability would increase. The main risk
event for the Lira next week will be the Central Bank of the Republic of
Turkey’s (CBRT) monetary policy meeting. There is speculation over a potential
rate hike in April, following Erdogan’s call for early presidential and
parliamentary polls. The Lira could receive further support if the CBRT raises
interest rates.
From a
technical standpoint, the USDTRY remains under pressure on the daily charts,
with prices trading around 4.05 as of writing. A failure of bulls to secure a
daily close above 4.05 could result in a decline towards the 4.00 level.
Alternatively, a weekly close above 4.05 could inspire bulls to challenge 4.10.
Commodity
spotlight – Gold
Gold
depreciated on Friday as easing geopolitical tensions and hopes of higher U.S
interest rates dented appetite for the yellow metal.
The
yellow metal continues to be driven by conflicting fundamental themes and this
is reflected in the price action witnessed over recent weeks. While bulls
remain inspired by geopolitics, lingering trade war fears and U.S political
risk, bears have found support in the form of rising U.S rate hike
expectations.
Gold
is likely to remain a battleground for bulls and bears until a fresh
directional catalyst is brought into the picture. Taking a look at the
technical picture, prices could challenge $1360 if bulls are able to keep above
$1340. Alternatively, a breakdown below $1340 may result in a decline towards
$1324.
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