Lukman Otunuga,
FXTM Research Analyst
It has been an
incredibly eventful trading week for the Nigerian economy. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html The week kicked off with a bang as GDP
figures slightly disappointed by cooling 2.05% during the first quarter of
2019.
Although this
development initially sparked concerns over the nation’s growth momentum
cooling, it must be kept in mind that this was the fastest first quarter growth
experienced since 2015. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html On Tuesday, the Central Bank of Nigeria left interest rates unchanged at 13.5% as
widely expected.
The key take-away
from the MPC meeting was the fact that the central bank identified that
emerging markets remain exposed to external shocks in the form of trade
tensions, Brexit and concerns over slowing global growth. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html Later on Tuesday afternoon,
Manufacturing and Non-Manufacturing PMI figures surpassed market expectations
which boosted confidence over the health of the largest economy in Africa.
With the latest
economic metrics pointing to signs of stability, the outlook for the Nigerian
economy remains encouraging. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html Further signs of improving economic
fundamentals and easing inflationary pressures should prompt the Central Bank
of Nigeria to make a move before the end of 2019 in an effort to stimulate
economic growth.
Although improving
domestic conditions will be a welcome development for the nation, investors
should not overlook external factors impacting the nation’s recovery. Ongoing
US-China trade developments, Oil prices and the Dollar’s valuation will play a
role in how Nigeria concludes 2019.
Dollar buoyed by trade worries.. but for how long?
The story defining the Dollar’s
appreciation continues to revolve around persistent US-China trade tensions
accelerating the flight to safety.
Uncertainty ahead
of the European Parliament elections and Brexit drama have also fuelled risk
aversion – ultimately boosting appetite for the Dollar which has become a
destination for safety. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html While the Dollar could continue rising
on the perception that the United States remains in a better position than
everyone else, the question is for how long?
Markets still
expect the Federal Reserve to cut interest rates this year while ongoing trade
tensions could end up negatively impacting the US economy. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html With market sentiment extremely fragile
and investors on edge, it could take an unexpected catalyst to send the Dollar
tumbling.
Commodity spotlight – Gold
Gold is struggling
to benefit from the cautious market mood thanks to an appreciating Dollar. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html The precious metal has struggled to
break back above the $1280 level this week despite ongoing US-China trade
tensions and Brexit accelerating the flight to safety. While Gold bears are
losing this battle, the war is far from over. With a patient Fed, speculation
of a US rate cut and lingering concerns over slowing global growth still core
themes, Gold remains supported in the longer term.
In regards to the technical picture,
sustained weakness below $1280 is likely to open a path towards $1268.50 in the
near term.
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