Senior Research Analyst at FXTM
It is
official, the UK economy has entered a recession for the first time in 11
years. Economic growth during the second quarter was abysmal, plunging 20.4%
after a 2.2% fall in the first three months of 2020. This was the largest
recession on record and worst GDP seen in Western Europe. To rub salt into the
wound, data released earlier in the week revealed an estimated one million jobs
had already been erased during the coronavirus induced lockdown.
The
current recession in the United Kingdom will certainly have negative impacts on
bilateral trade between Nigeria and the United Kingdom. A possible spillover
effect on Nigeria amid a reduction in trade and investment could enforce
further pressure on the country which already entangled in a fierce battle
against COVID-19.
As we
move deeper into the third quarter of 2020, the outlook for Nigeria will remain
influenced by not only the coronavirus developments but Oil prices and
implementation of the revised 2020 budget of N10.81trillion.
Given
how the economic calendar for Nigeria is void of Tier 1 economic releases this
week, expect the Naira to be impacted by Dollar shortages and local stocks to
remain influenced by domestic risks.
Commodity
spotlight – Gold
It has
been a wild week for Gold. The precious metal experienced some hefty profit
taking with prices plunging as low as $1863 yesterday before rebounding back
above $1900. With US 10-year Treasury yield jumping the highest level since
early July, this dented some of Gold’s allure.
However,
the outlook for Gold remains bullish, with this current pullback potentially
opening the path to fresh all-time highs as fundamentals stimulate appetite for
the metal. Looking at the technical picture, a weekly close above $1900 could
signal further upside in the medium term.
For
those who like to look at Gold on the shorter timeframe, keep a close eye on
how prices react around the $1900 psychological level on the H4 charts.
Weakness below this level could trigger a decline towards $1870.
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