Lukman Otunuga,
FXTM
Research Analyst
There were no
surprises in the Bank of England’s policy decision today to leave interest
rates unchanged at 0.75%. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The real surprise was the bank’s latest
growth forecasts, which left the doors open for further tightening in the
future. Sentiment over the UK economy is poised for a boost, given how economic
growth is now projected to expand to 1.5% this year from the decade-low 1.2%
predicted in February. While growth figures were revised higher, inflation
figures were revised lower, to 1.6% in 2019 and 2.0% in 2020. Overall, the Bank
of England came across as cautiously optimistic but also highlighted how Brexit
continues to cloud the outlook for monetary policy.
With the central
bank likely to maintain a patient stance and closely monitor Brexit
developments before making any decision on interest rates, the Pound is seen
edging lower in the short to medium term. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html Should economic data from the UK
continue to improve and more clarity is offered on Brexit, the BoE will have a
valid argument for taking action. However, when it comes to Brexit, if
uncertainty remains the name of the game, rates are likely to remain unchanged
for the rest of 2019.
Looking at the technical picture, the
GBPUSD is under pressure on the daily charts with prices trading marginally
below 1.3050 as of writing. Sustained weakness below this point is seen opening
a path back towards the psychological 1.3000 level.
Dollar rebounds as Fed quell rate cut hopes
Dollar bulls were injected with fresh
inspiration, thanks to the Federal Reserve sounding less dovish than expected
on Wednesday evening. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
With Jerome Powell indicating that the
central bank’s current policy stance is appropriate, investors were forced to
re-evaluate the probability of a rate cut by the end of 2019. The Dollar is
seen pushing higher in the near-term as recent, positive economic data from the
States ensures that the Greenback remains a destination of safety in times of
uncertainty.
The next major risk event for the
Dollar will be the US jobs report scheduled for release on Friday. Confidence
over the US economy is likely to receive a boost if the jobs data results
exceed market expectations.
How will NFP impact the Naira?
The US jobs data report is unlikely to
have an immediate impact on the Naira. However, if the report dishes out an
upside surprise and fuels expectations of a US rate hike, the Naira, like many
other EM currencies, may feel the heat. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html Hypothetically, the prospects of higher
rates have the potential to fuel concerns over capital outflows from emerging
markets, which is seen weighing on the Naira and many other EM currencies.
Commodity spotlight – Gold
The Dollar’s appreciation following the
Fed meeting mid-week has offered nothing but pain and punishment to Gold, with
prices trading towards $1270 as of writing.
A less dovish-than-expected Federal
Reserve was negative for Gold prices, while optimism over US-China trade talks
compounded downside pressures. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html With the Dollar likely to remain
supported ahead of the US jobs report on Friday, the precious metal is seen
breaking below $1270 in the near term. Should the pending NFP report exceed
market expectations, Gold is likely to slide towards $1265.
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