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Naira marginally gains on Dollar weakness; FOMC in focus

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Dollar and Naira Bills

By  Lukman Otunuga

The Naira entered the final full trading week before Christmas on a steady note despite concerns over plateauing global economic growth weighing on risk sentiment.

It is becoming clear that a weakening Dollar remains one of the drivers behind the Naira’s marginal gains on the parallel exchange. With the Dollar seen depreciating ahead of the Fed meeting as investors remain on the side-lines, emerging market currencies such as the Naira have the opportunity to appreciate further.

However, geopolitical risk factors in the form of lingering trade tensions, Brexit-related uncertainty and political risk in France are seen fuelling risk aversion down the road. If Oil prices continue to depreciate and the Dollar ends up rebounding from the risk-off mood, the Naira will most likely be one of the many casualties.

Dollar weakens despite market caution

The Dollar is struggling to find support from market caution ahead of the Federal Reserve policy meeting this afternoon.

With a rate hike in December already heavily priced in, investors will most likely direct their attention towards the policy statement and press conference for clues on rate timings in 2019. It must be kept in mind that dovish comments from Fed officials and soft economic data have clouded the Dollar’s medium- to longer-term outlook. Buying sentiment towards the Dollar is seen diminishing further if the Federal Reserve implements a dovish hike. Although the Dollar Index is trading near 2018 highs, it does feel like bulls are living on borrowed time. A breakdown below 97.00 could trigger a decline back towards 96.50.

Gold shines ahead of Fed meeting

Gold bulls are poised to remain in the driver’s seat as investors struggle to shake off jitters over global economic growth and lingering trade tensions. A softening Dollar boosted appetite for the yellow metal with prices trading marginally above $1,248 as of writing. With the Dollar likely to remain depressed ahead of the Federal Reserve meeting and risk aversion magnetizing investors to safe-haven assets, Gold has the potential to appreciate further in the near term. Technical traders will be closely observing how prices behave above the $1,240 resistance level. If the upside momentum holds, the next key points of interest will be at $1,250.70 and $1,258 – a level that resides just below the 200 Daily Simple Moving Average. In an alternative perspective, repeated weakness below $1,240 will be good news for bears and should encourage a decline back towards $1,228.00.

 

Ugo Onwuaso is an ICT enthusiast. He believes technology should be used for general good. He holds a Master of Public Administration (MPA) degree from the Lagos state University.

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Nigeria inflation rises as Presidential elections loom

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By Lukman Otunuga, Research Analyst at FXTM, 

Repeated signs of rising inflationary pressures in Nigeria could fuel speculation over the Central Bank of Nigeria raising interest rates in a bid to tame consumer prices.

Nigeria’s inflation jumped to a seven-month high of 11.44% in December due to rising food prices. With inflation building momentum and seen accelerating further due to increased government spending ahead of the presidential elections, the Naira could be in trouble.

Markets mixed ahead of US earnings

The mood across financial markets was mixed today as concerns over China’s economic outlook, Brexit developments and a prolonged US government shutdown weighed on risk sentiment.

Anticipation is set to mount as market players prepare for the US earnings season with numbers from Netflix expected this afternoon. Although earnings kicked off on a positive note as upbeat US bank earnings boosted investor confidence, it may be too early for any celebrations. It must be kept in mind that Apple has already issued Q1 profit warnings. Markets will be looking for signs of other multinational US companies impacted by trade tensions – namely in the technology and agriculture sector.

Sectors that could surprise markets are consumer staples, healthcare and utilities as they tend to perform well in times of uncertainty. Will this be a great earnings season? Confirmation is still needed from other key sectors to evaluate how consumers are behaving.

There is a strong possibility that the US government shutdown will negatively impact results and outlook for some companies. Corporations that obtain a significant portion of their revenue from government business could be punished by delays in payment and contracts. Although yesterday was somewhat positive for stocks, investors should remain diligent and alert. With the fundamental drivers weighing on global sentiment present, stock markets remain vulnerable to downside shocks. Geopolitical risk factors such as trade tensions, Brexit uncertainty, political risk in Europe and instability in Washington will continue draining investor confidence. Global growth fears and growing concerns over China’s economic outlook are likely to promote risk aversion – ultimately reducing appetite for global equities.

Sterling searches for next catalyst

The British Pound was clearly unfazed yesterday evening despite Theresa May narrowly surviving a vote of no-confidence.

The anticlimactic price action suggests that this outcome was already heavily factored in. With Theresa May racing against the clock to present an alternative Brexit deal to Parliament, the Pound seems to be on standby mode. If May is unable to secure further concessions on the Irish border backstop from the European Union, expectations are poised to mount over a second referendum being in the cards. With Sterling’s outlook dictated by Brexit developments and political situation at home, traders should brace for volatility ahead.

Focusing on the technical picture, the GBPUSD’s direction remains influenced by Brexit newsflow. There needs to be a break above 1.2920 to open a path higher towards the psychological 1.3000 level.

Commodity markets – Gold

It has been a lackluster trading week for Gold thus far with the metal bouncing within a modest range. Price action suggests that the metal is searching for a fresh catalyst to make the next major move. Resistance can be found around $1,296 and support at $1,280. A breakout above $1,296 will open the gates towards the psychological $1,300 level and beyond. On the other hand, weakness below $1,280 is seen triggering a decline back towards $1,272

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How to Save Money on Online Shopping This New Year

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By Adeniyi Ogunfowoke,

Online retailers seem to be becoming more innovative and creative these days to score big with shoppers. However, if you are a smart deal hunter or want to save money, try using these clever and helpful online shopping tips shared by Jumia, Nigeria’s no 1 shopping destination.

Take part in the ongoing clearance sales

The Jumia clearance sales is presently on and it features amazing discounts, flash sales and vouchers. It affords you the opportunity to save a lot of money despite the fact that we just hit the new year. The clearance sales started yesterday and it will run up until January 31st. So, what are you waiting for? Download the Jumia App and start shopping and saving at the same time.

Organise your emails

Signing up to newsletters and promotion lists can save you a lot of money, but are you too reluctant about getting your email spammed? If this is the case, now is the time for you to organise your emails. One important thing you can do is to unsubscribe from junk emails. Additionally, you should activate email notification so that you will be alerted as soon as newsletters and other promotions are sent.

Leave items in your cart

Leave the products in your cart for a day or two. Firstly, you’ve just avoided making an impulse purchase. Secondly, most retailers dislike unclosed deals and will try to retain you. Remember the trick works only when you have an account on the merchant’s website and you are logged in when you leave your cart.

Shop at the right time of the day

Sometimes you have to be strategic when you shop online. There are certain times of the day when some product items are sold at give away prices. For example, for this Jumia clearance sales, there is the Mega Flash Sales at 12 noon daily. To wow you further, a 92k Bruhm air conditioner was sold for 40k and it sold out within minutes. So, ensure that you shop at the right time of the day this new year.

 

 

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Will Nigeria be affected by Brexit?

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By Lukman Otunuga, Research Analyst at FXTM

Market expectations remain elevated over Theresa May’s Brexit deal facing defeat in the House of Commons this evening.

Investors will be paying very close attention to the conclusion of the “meaningful vote” to determine what could happen next. An outcome where May loses by less than 100 votes could offer the government a lifeline to pass an amended Brexit deal through parliament on the second try. However, if May experiences a crushing defeat, this opens doors to Labour triggering a vote of no-confidence, an extension of Article 50, May seeking further concessions from the European Union, a snap election and in extreme scenarios a second referendum.

Market sentiment will most likely receive a boost if May unexpectedly wins the meaningful vote while a narrow loss is seen removing some uncertainty. A heavy defeat of May’s Brexit plan will negatively impact sentiment and severely punish the Pound.

The outcome of today’s vote will have little immediate impact on Nigeria but the longer-term outlook must not be overlooked. A negative outcome to Brexit that is followed by prolonged uncertainty is seen weakening the British Pound and UK economy considerably. This is bad news for Nigeria, especially when considering how Britain may reduce its investment to key projects in the nation.

EM currencies hit by caution…but Naira steady

Emerging market currencies entered the trading week on a cautious note as geopolitical risks and fears over slowing global growth left investors uneasy.

The performance across the EM currency space remains mixed with Indian Rupee, Malaysian Ringgit, and South African Rand depreciating. However, the Turkish Lira, Chinese Yuan, Indonesian Rupiah and Naira were able to stand tall against the Dollar. With Brexit-related uncertainty and political uncertainty in Washington among many other geopolitical risk factors draining investor confidence, EM currencies remain vulnerable to losses.

In Nigeria, investors will keep a close eye on the inflation report scheduled for release on Thursday. Persistent signs of rising inflationary pressures could encourage a shift in the CBN’s monetary policy stance this year.

Currency spotlight – GBPUSD

The Pound’s outlook hangs on what happens after the Brexit “meaningful vote” on Tuesday evening.

While the outcome of the vote remains open to question, it will certainly have a lasting impact on the British Pound. In regards to the technical perspective, the GBPUSD secured a weekly close above 1.2820, mostly due to Brexit noise. The 1.2820 level is seen acting as support that pushes prices towards 1.2920.

 

 

 

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