Lukman Otunuga,
FXTM Research Analyst
A sense of caution
and unease lingered across financial markets today as investors grew
increasingly concerned over US-China trade talks falling apart this week. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Rising trade tensions between the
world’s two largest economies have hammered risk sentiment with global equities
and emerging market assets under pressure. Should the United States end up
increasing tariffs on imports from China on Friday, risk aversion is likely to
become a dominant theme as global growth fears return with a vengeance.
Oil waits for fresh catalyst
Oil prices held steady on Tuesday as
record Chinese imports and tighter global supplies slightly overshadowed
concerns over rising US-China tensions.
The price action
witnessed in recent days suggests that oil may be waiting for a fresh
directional catalyst to push higher or trade lower. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html Lower oil prices will pressure
energy-exporting emerging markets such as Nigeria. With a handsome chunk of the
nation’s export revenues sourced from oil sales, a drop in the commodity is
negative for growth potential. Looking at the technical picture, WTI has scope
to sink towards $60, which is Nigeria’s crude oil benchmark for the 2019
budget.
Dollar hovers above 97.50
The US Dollar
Index (DXY) has held steady around the 97.50 levels so far this week amid
heightened uncertainty over US-China trade tensions. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Although the Dollar remains King of the
currency space this week amid market uncertainty, the question remains for how
long? Market players will be keeping a very close eye on trade talks in
Washington this week, as any development on this front could spark volatility
amid the fragile sentiment. Dollar bears are likely to enter the scene if trade
tensions ease and both sides end up finding a middle ground on trade this week.
Currency spotlight – EURUSD
EURUSD hovered
around the 1.12 level, after the European Commission lowered the EU’s growth
forecasts for 2019, with Germany’s growth projections reduced by more than
half, down to 0.5 percent for the year. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html The Eurozone continues to be a soft
patch among major economies, contributing to the moderating path for global
growth.
Such a lacklustre trajectory is only
going to put a lid on the Euro, with the outlook further clouded by trade
tensions between major economies that have already adversely impacted Europe’s
manufacturing sector. Euro bulls have a tremendously difficult task of making
their case amid such fragile economic conditions, as the EURUSD’s bearish channel
looks set to lead the currency pair towards the 1.11 support level.
Commodity spotlight – Gold
It has been a positive trading week for
Gold thus far thanks to renewed US-China trade tensions and concerns over
slowing global economic growth. The precious metal has punched above $1290
today and is positioned to trade higher as risk aversion accelerates the flight
to safety. A daily close above $1287 is likely to signal a move higher towards
the psychological $1300 level.
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