While the local
currency has scope to end gains amid expectations over the Fed taking a pause
on rate hikes this year, the upside is likely to be limited by falling Oil
prices. With depressed Oil reducing government revenues and complicating the
CBN’s efforts to defend the Naira, the local currency remains in the firing
line. If Oil prices continue to weaken during the early parts of 2019, the
Naira is at threat of depreciating.
Stock markets resume rollercoaster ride
The final
trading week of 2018 has been explosively volatile and wildly unpredictable due
to geopolitical risks. Global sentiment repeatedly swung from extremely bearish
to bullish this week as investors tussled with concerns over slowing global
growth, US-China trade developments, Brexit-related uncertainty and a partial
US government shutdown. Although US stock markets bounced back to life
yesterday to end positive and Asian shares traded mostly higher this morning,
it is certainly too early for any celebrations. With investor appetite for riskier
assets seen diminishing amid the unfavourable market conditions, global equity
markets remain vulnerable to downside shocks. The geopolitical risk factors
weighing painfully on global sentiment are likely to encourage investors to
seek safety in the Japanese Yen and Gold.
Dollar hit by growth concerns and US
politics
Buying sentiment
towards the Dollar was dealt a sharp blow after a drop in US consumer
confidence rekindled fears over a slowdown in economic momentum.
Concern over a
partial US government shutdown compounded to the Greenback’s woes with the
Dollar Index trading marginally below 96.45 as of writing. With slowing growth
fears threatening the Dollar’s safe-haven status, the sentiment pendulum could
swing in favour of the bears in 2019. In regards to the technical picture, the
Dollar Index is shaky on the daily charts with prices trading below the 96.50
support. Sustained weakness below this level has the potential to open a path
towards 96.00 in the near term.
Commodity spotlight – Gold
It is shaping up
to be an incredibly positive trading week for Gold prices thanks to heightened
geopolitical risks and Dollar weakness.
Explosively
volatile equity markets, global growth fears, Brexit uncertainty and political
instability in Washington have accelerated the flight to safety – ultimately
sending Gold prices to levels not seen in more than 6 months. With turbulent
market conditions guiding investors towards safe-haven assets, Gold is on route
to concluding 2018 firmly above the $1,272 resistance level. The yellow metal
has the potential to become a major talking point across markets next year,
especially when considering how the Dollar is seen weakening on growth concerns
and Fed expected to take a pause on rate hikes in 2019. Taking a look at the
technical picture, a yearly close above $1,272 is likely to trigger a move
higher towards the $1,288 and $1,300 level.
No comments:
Post a Comment