Lukman Otunuga,
FXTM Research Analyst
comment
It has certainly been a painful trading
week for emerging market currencies thank to the combination of rising oil
prices, a broadly stronger Dollar and renewed concerns over slowing global
growth. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Major emerging market currencies like
the South African Rand, Argentine Peso, Turkish Lira and South Korean Won among
many others all felt the heat. With oil prices trading around elevated levels
and the Dollar reclaiming its thrown in the currency space, this is bad news
for emerging market currencies especially those whose nations are energy
importers. However, the jump in oil prices this week has been a breath of fresh
air for oil exporters like Nigeria, given how a fair chunk of its revenues are
acquired from oil sales. The Naira witnessed stability against the Dollar
throughout the week with prices trading around 358N on the parallel markets.
Much attention will be directed towards
the pending manufacturing and non-manufacturing PMI reports which should offer
fresh insight into the health of the Nigerian economy. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html Should
both PMI figures exceed market expectations, confidence over the largest
economy in the Africa will most likely receive a boost.
Strong Dollar paves way for US Q1 GDP print
All eyes will be on the US GDP data
release for Q1, scheduled to be announced later on Friday. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html Investors
need to monitor this data for guidance on whether the Dollar Index will find
inspiration for further fuel to add to a rally that is close to 0.8% for the
week.
Markets are expecting a 2.3% GDP print,
which is 0.1 percent higher than the previous quarter, suggesting that US
economic growth momentum remains very much intact. The GDP release will set the
stage for the upcoming Fed decision next week, whereby investors will try to
anticipate how the world’s most important central bank will react to the string
of resilient economic indicators that have been pumped out by the US economy as
of late, even as the Fed Funds Futures rate points to a 61 percent chance of an
interest rate cut by December.
Commodity spotlight – Gold
Gold traders aren’t allowing prices to
fall too far below its year-to-date $1,280 support level for now, as concerns
over the global slowdown continue to hang over markets. Economic data out of
Germany and South Korea this week point to soft patches in the global
landscape, which may keep demand for Bullion resilient as the year progresses.
However, should the US Q1 GDP print,
due to be released on Friday, exceed market expectations, that could propel the
US Dollar to higher levels, preventing Gold from climbing meaningfully back
above $1,280. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html A US economy that’s seen to be on solid footing
could also encourage risk appetite, potentially leading Gold back on the path
towards $1,260.
WTI Oil bears re-enter the scene
WTI futures were unable to hang on to a
new year-to-date high, as prices eased off the $66.60/bbl mark heading into the
weekend. However, with US sanction waivers on Iran’s Oil set to expire next
week, that is expected to limit global supplies and support Oil prices over the
coming months.
It remains to be seen how Saudi Arabia
and its allies can ramp up and fill the gap left by Iran’s exclusion, ensuring
that Oil’s 2019 rally doesn’t get out of control. Oil bulls may then have to
look to the OPEC+ decision in June regarding its ongoing supply-cuts programme,
as the next potential catalyst that could send prices towards $80/bbl.
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