FXTM Research Analyst
The economic calendar in Nigeria is
relatively light this week with the only scheduled Tier 1 report already
released earlier this morning.
Though the encouraging balance of trade
figures for Q1 are out of the way, investors should not be quick to conclude
that this will be a quiet week for Nigeria. It must be kept in mind that local
markets are still digesting the volatility in Oil markets and the likely impact
of last week’s disappointing US jobs data on the Naira and the economy. Should
external factors in the form of trade tensions and global growth concerns
impact risk sentiment, emerging markets may feel the pinch, with Nigeria
falling into the category.
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Dollar nurses NFP inflicted wounds
The US Dollar is attempting to shake
off the hangover from last Friday’s painful selloff with prices trading around
96.7 level at the time of writing.
Despite shedding over one percent so
far this month, the current levels in the DXY will be attractive to potential
Dollar buyers. The Dollar has managed to show its resilience to periods of
weakness several times over the past 12 months, and investors will be closely
monitoring whether it will be able to take this latest setback from the
employment report in its stride.
What is more concerning for the DXY
moving forward is that several US economic indicators in the second quarter
have suggested that US economic growth momentum is cooling, raising speculation
that the Federal Reserve will need to cut interest rates over the coming
months. The US central bank may well
intervene on its monetary policy settings to sustain growth in the world’s
largest economy, which is on the cusp of reaching its longest-ever expansion
come July.
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Even though ramped-up market bets for a
Fed rate cut this year have created a somewhat Dollar-negative environment,
those hoping for the DXY to capitulate may be left disappointed, given the
relatively weak pushback from other G10 currencies. Economic woes continue to
cloud the Euro’s outlook, while the Pound remains mired in the Brexit fog,
implying that these fluctuations in the Dollar Index could only provide little
upside to other global currencies
There will be a special focus on US
inflation and retail sales figures this week following the dismal US jobs
report for May. Should these two reports disappoint, market speculation is
likely to heighten over the Fed cutting interest rates this year. Such a
development will be negative for the Dollar but warmly welcomed by emerging
market currencies.
Commodity spotlight – Oil
Brent futures are trading above the
$60/bbl support level and on course for three consecutive days of gains, after
the Saudi Arabian Energy Minister expressed confidence that OPEC+ producers
will prolong their output cuts programme through the second half of 2019.
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With Oil prices recently flirting
within a bear market, slowing global demand appears to be featuring prominently
on the minds of investors, as the fallout from heightened trade tensions
continues to be felt on the global economy. The sustainability of Oil’s recent
climb could be determined by the outlooks of several key industry bodies
scheduled this week, whereby more downcast projections for global demand will
be used as a threat to prompt traders to continue chipping away at Oil’s 15
percent year-to-date gains.
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