Wednesday, 22 January 2020


Lukman Otunuga,
Senior Research Analyst at FXTM

The UK-Africa Investment Summit held in London yesterday was a major milestone in international relations and paved the way to fresh partnerships across Africa.

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More than $6.5 billion worth of commercial deals in sectors including infrastructure, energy, retail and technology were signed at the summit. Among the top winners was Nigeria as it secured business deals with four British companies. While this development is encouraging for Nigeria as the country steers away from oil dependence, any positive impacts will be longer term.

Nigeria certainly has the potential to secure a better trade deal with the UK post Brexit but this will depend on a host of factors. During the 11-month transition period, most of the UK’s efforts will be on the European Union and other major trading partners, meaning that African nations may be down the list on trade. However, a UK outside of the European Union may have less negotiating power which gives Nigeria and other African nations a chance to secure mutually beneficially deals.

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The main event risk for the Nigerian economy this week will be the Central Bank of Nigeria (CBN) policy meeting on Friday which is expected to conclude with interest rates left unchanged at 13.5%. With inflationary pressures making a return amid border closures and the 50% increase in VAT from 5% to 7.5% possibly adding fuel to the fire, will the CBN surprise by hinting a rate hike?

Euro steady after Trump-Macron truce
In other news, the Euro held steady against the Dollar after France announced an agreement with the United States on a truce in their digital tax dispute.

With the accord lasting until the end of 2020, this is a welcome development for the Eurozone as tensions ease between both sides. In regards to the technical picture, the EURUSD is trading around 1.1095 as of writing. A breakout above 1.1100 may open the doors towards 1.1170. Alternatively, a move back below 1.1080 could trigger a decline towards 1.1040.

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Commodity spotlight – Gold
Gold is set to remain the prime destination for safe haven buyers this week as developments in China and caution ahead of the Davos summit dent risk sentiment. The precious metal is trading around $1566 as of writing and could challenge $1580 if risk aversion intensifies. A solid breakout above here will most likely open the doors back towards $1600.

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