Nigeria week ahead: OPEC meeting & Gold in focus

Gold continues to sparkle in the background amid the overall caution and Dollar weakness.

It may be a relatively quiet week for the Nigerian economy as the economic calendar is void of any Tier 1 releases. With the next major report scheduled for release on April 15, the Naira and Nigerian stock markets are likely to remain influenced by external forces.

Sentiment towards the largest economy in Africa is positioned to become even brighter after the Central Bank of Nigeria surprised markets by cutting interest rates in March. With lower rates reducing the cost of borrowing and encouraging businesses to increase investment spending, this will be positive for growth potential.

Outside of Nigeria, US-China trade developments, Brexit and economic reports from major economies will ensure this will be another busy week for global markets. The mood across stock markets was mixed today, amid cautious optimism over trade talks and growing anticipation ahead of US earnings.

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In the currency space, the dollar entered the week on shaky footing despite last Friday’s US jobs report soothing concerns over the health of the largest economy in the world. The Dollar is likely to remain pressured by speculation around the Fed cutting interest rates by year-end. Markets are now expecting a 60% chance of this becoming reality.

A vulnerable Dollar is good news for the Naira and many other emerging market currencies. Much attention will be directed towards the FOMC Minutes which will be closely scrutinized for more clues on the Fed’s policy path. Should the minutes sound dovish, this may end up weakening the Dollar further.

Brexit drama is set to remain a major theme in the United Kingdom as the April 12 deadline looms. With Theresa May flying to Berlin and Paris in a bid to persuade the EU to agree to extend Article 50, this is already shaping up to be a wild week for the Pound. Whatever the outcome of Theresa May’s trip, it will certainly have a lasting impact on the Pound.

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Taking a look in the commodity markets, Brent and WTI posted new highs for 2019 thanks to geopolitical tensions and Dollar weakness. OPEC’s ongoing supply cuts and US sanctions on Iran and Venezuela have been the major driver of prices throughout this year. However, the latest boost was received from an escalation of fighting in Libya which is threatening further supply disruption. If output from Libya is reduced significantly in the upcoming days and OPEC does not act, we may see a further 5-10% surge in prices over the next two weeks.

Gold continues to sparkle in the background amid the overall caution and Dollar weakness. With concerns over slowing global growth still a major theme and the Fed expected to remain dovish, Gold is protected from severe downside shocks. A solid daily close above $1300 is likely to open a path towards $1324.

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The views expressed in this piece are the author’s own and do not necessarily reflect News Central’s editorial stance.


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