Senior Research Analyst at FXTM
Investors
have stormed into the trading week with a renewed sense of confidence after
last Friday’s US jobs report fuelled hopes that the worst of the coronavirus
chaos could be behind us.
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The
United States created 2.5 million jobs in May, smashing the market expectations
of -8 million while the unemployment rate dropped by -13.3% compared to the
-20% forecast. With average hourly earnings printing at -1% month-on-month,
below the 1% estimate, the report was somewhat encouraging and suggested that
the US economy was trying to get back on its feet.
However,
the devil is in the detail. Considering how there have been downward revisions
of more than -1/2 million to previous two months and government subsidies are
responsible for much of the rehiring, the recovered jobs remain at risk. Markets
seem to be looking beyond this and riding on the optimism and this continues to
be reflected in equity and currency markets and emerging markets.
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Speaking
of emerging markets, the Nigerian economy was thrown a lifeline after oil
prices stabilized on economic recovery hopes and extended production cuts by
OPEC +. With Brent crude trading back above $40, the increase in export
earnings and foreign exchange reserves may provide more ammunition for the
Central Bank of Nigeria to defend the Naira. Should Oil prices continue to
appreciate in the week ahead, this may support the Naira and slightly soothe
concerns over the country’s fragile economic outlook. On the data front, all
eyes will be on the latest balance of trade figures for which is expected to
show trade surplus hitting NGN 100 billion in March 2020.
Outside
of Nigeria, expect global sentiment to be influenced by recovery hopes,
economic fundamentals, rising equity markets and commodity prices. As we
approach the second half of 2020, the key question is whether the monetary
bazooka’s by central banks and fiscal government timebombs were enough to quell
the negative impacts of the coronavirus to the global economy.
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