Friday 25 January 2019


The Nigerian Naira entered today’s trading session in a steady fashion as investors juggled with various fundamental themes pulling and tugging on risk sentiment.

With a number of Tier 1 economic releases today in Nigeria, the Naira is poised to remain firm on the parallel exchange. Although the local currency is seen witnessing further stability in the near term, geopolitical risks in the form of trade tensions and global growth fears may create headwinds down the road. With the presidential elections looming and oil prices still depressed, the upcoming trading weeks will be critical for the Nigerian Naira. The toxic mixture of rising inflationary pressures from increased government spending and depressed oil prices will spell very bad news for the Naira’s stability. With the IMF also adding to the gloom by downgrading Nigeria’s economic forecast for 2%, there will be a special focus on the election outcome. While Nigeria continues its mission to break away from oil reliance, the nation’s short- to medium-term outlook remains influenced by oil prices.

Unfortunately, the outlook for oil points to further downside thanks to supply and demand dynamics. Concerns over excessive supply in the markets coupled with worrying signs of falling demand continue to expose oil prices to downside risk.

Will the Central Bank of Nigeria be able to defend the Naira as elections loom and foreign exchange reserves dwindle? This is a question on the mind of many investors.

Currency spotlight – GBPUSD
The British Pound appreciated sharply across the board yesterday as fears over a ‘no deal’ Brexit continued to ease. Market expectations over the government extending article 50 to avoid a no deal outcome clearly supported buying sentiment towards Sterling. However, gains were short-lived with the currency weakening today amid the endless uncertainty over Brexit. Focusing on the technical picture, the GBPUSD turned bullish on the daily charts after prices breached the psychological 1.3000 level. A solid daily close above this point is seen opening a path higher towards 1.3075 and 1.3100. Alternatively, a decline back below 1.3000 could encourage move back towards 1.2920.

Commodity spotlight – Gold
An appreciating Dollar sent Gold tumbling with prices trading around $1,279.50 as of writing.

Although bears seem to be in the driver’s seat, the outlook for the precious metal still points to further upside. With geopolitical risks draining risk sentiment, Gold remains heavily supported in the medium to longer term.

Technical traders will continue to closely observe how the metal behaves above the $1,272 level. A rebound back towards $1,290 will be in the cards if this level proves to be a reliable support. On the other hand, a breakdown below this level is seen opening a path towards the $1,260 region.

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