Saturday 13 April 2019


hand holding naira notes
Lukman Otunuga,
FXTM Research Analyst

Even as WTI futures have fallen below $64/bbl at the time of writing, Oil prices remain on course for their longest run of weekly gains since 2016.

The conflict in Libya and US sanctions output on Venezuela and Iran are constraining Oil supplies, even as OPEC+ producers press on with cuts through June. Rising Oil prices will remain a welcome development for Nigeria, given how a handsome chunk of export revenues are sourced from Oil sales. Appreciating Oil prices are likely to provide foreign exchange stability, ability to implement 2019 budgets and economic growth. However, it still leaves the country vulnerable to external shocks.

With uncertainties revolving around slowing global growth potentially derailing attempts by OPEC+ to rebalance, Nigeria still needs to break away from Oil, and to derive growth from other sustainable sources.

Markets mixed ahead of US earnings
European shares traded flat on Friday as investors evaluated China’s latest trade figures.
Although China’s exports rebounded in March, rising over 14.0% year-on-year, imports disappointed by shrinking 7.6% - marking a fourth consecutive month of decline.

With the trade figures illustrating a mixed picture of the second largest economy in the world, investors are likely to adopt a guarded approach ahead of first quarter earnings releases from two of the biggest banks in the United States. Investors may get a glimpse on how the fading impacts of tax cuts and the Federal Reserve’s cautious shift on interest rates have impacted JP Morgan and Wells Fargo. Should earnings from both banks disappoint, risk sentiment for global equities may take a hit.

Dollar Searches for new catalyst
The Dollar Index has surrendered much of its gains and is now trading below the 97 mark, even as the latest US Producers Price Index exceeded market expectations, while jobless claims surprisingly fell to their lowest levels since 1969.

Coupled with the March US inflation data released earlier this week, the data underscores the central bank’s “patience” on US interest rates, and this may remain unchanged for the rest of 2019.

Markets have now dialled back expectations of a US rate cut by December to just below 50 percent, from above 57 percent earlier this week. With such odds being priced into the Greenback, any data or event that tilts the balance of risks to either side could influence the Dollar’s direction, although which is the way forward remains uncertain for the time being.

Gold steadies after biggest drop in two weeks
Meanwhile, markets are pushing the boundaries on risk sentiment as Gold fell by over 1 percent on Thursday before bouncing off the $1,290 mark. Although the IMF’s cut to its 2019 global growth forecast was a downer, investors are hoping that a not-too-distant US-China trade deal and a stabilizing Chinese economy may weaken headwinds currently felt by the global economy. However, should the outlook take a turn for the worse, that could jolt risk-off sentiment and rally support for the safe haven assets, including Bullion.

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