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| President Donald Trump |
Senior Research Analyst at FXTM
The
sentiment pendulum swung deeper into “risk-on” territory on Tuesday morning
after President Donald Trump’s departure from hospital soothed concerns about
his health.
Equity bulls in Asia were instilled with a renewed sense of confidence on this news, elevating shares to levels not seen in more than two weeks. European stocks opened slightly higher with the positive mood potentially finding its way back into Wall Street this afternoon. In Nigeria, the All Share Index (ASI) gained 2.11% on Monday and could extend gains today amid the risk-on sentiment.
There
seems to be a growing sense of optimism for more U.S fiscal stimulus after
House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin spoke by phone
for about an hour on Monday. Market sentiment could brighten if both sides
reach a breakthrough on new government spending before the Presidential
elections less than a month away. Such an outcome may inject equity bulls with
enough inspiration to retest 2020 highs. However, the road north remains filled
with many obstacles in the form of rising coronavirus cases in the United
States and across the globe and lingering fears around economic growth.
Dollar waits for Jerome Powell
After
depreciating against most G10 currencies yesterday, the Dollar has entered
Tuesday’s session struggling to shake away the Monday blues. In our technical
outlook, we discussed the possibility of the Dollar Index trending lower if
94.00 proves to be reliable resistance. The Dollar Index is trading around
93.48 as of writing and could slip towards 92.70 if bears can conquer the 93.30
intraday support.
Fed
Chair Jerome Powell will be under the spotlight today as he delivers a keynote
speech at the National Association of Business Economics (NABE) conference. Any
fresh clues on monetary policy could influenced where the Dollar Index (DXY)
performance this week.
Currency spotlight – Naira
The
Nigerian Naira recovered from a low of 385.50 per USD on the official market
seen last Friday after the Central Bank of Nigeria offloaded Dollars to
stabilize the local currency.
On the
black-market exchange, the Naira has slightly recovered trading around 458 per
USD today. The positive sentiment and recent jump in Oil prices could support
the Naira in the near term. However, the recent decline in foreign exchange
reserves and rising inflationary pressures amid the coronavirus crisis may
limit the Naira’s upside gains.
Commodity
spotlight – Gold
Gold
prices slightly dipped on Tuesday morning as equities roared to life following
Trump’s discharge from hospital, though a softer Dollar limited the precious
metal’s downside losses.
Overall,
the outlook for Gold remains bright despite the risk-on mood sweeping across
financial markets. Rising coronavirus cases across the world, political risk
ahead of November’s US election, Brexit related uncertainty and low-to-negative
US government bond yields are likely to stimulate appetite for the Gold in Q4. If
the Dollar ends up weakening on rising inflationary pressure in the United
States, this could prove a tailwind for Gold which is also considered an
inflationary hedge. Looking at the technical picture, the daily close above
$1900 could open a path towards $1935. Should prices break back below $1900,
Gold may sink towards $1865.
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