Nigeria Week Ahead: Inflation Data, China and Dollar in Focus

By Lukman Otunuga, FXTM Research Analyst,

Nigeria will release updates on its inflation numbers in the week ahead, amid easing concerns over slowing global growth and broad-based Dollar weakness. Market players will be keeping a close eye on whether inflationary pressures have cooled further in March, which will shape expectations over the Central Bank of Nigeria’s (CBN) next potential policy move in the future. Sentiment towards the nation’s economy is likely to improve if inflationary pressures continue to ease. While the Naira could be impacted by domestic economic data, the currency remains influenced by external forces in the form of US-China trade developments, global growth concerns, the Dollar’s valuation and Oil prices.

China showing further signs of stabilizing

Adding to the risk appetite seen in early trade this week are China’s March external trade figures, which were released at the end of last week and helped ease some of the concern over a decline in the nation’s economic momentum. China’s exports for the month surprised to the upside, suggesting that global demand for trade remains intact and that the Chinese economy will find solid footing as a result.

China’s Q1 GDP, as well as March’s industrial production and retail sales data, are all due for release on Wednesday. These will be treated as tier-one economic releases from China and the data should offer further indication as to how the world’s second largest economy is holding up. Note that the IMF recently revised China’s forecasted growth higher, in contrast to the lower projections for global growth.

Should the “China stabilizing” narrative gather momentum, complemented by evidence of stimulus measures feeding into China’s economy in the months ahead, this should offer room for more gains in emerging market assets over the near-term.

Dollar steadies as markets await latest US data

The United States is also slated to announce its March industrial production and retail sales data this week, along with the latest Markit Purchasing Managers Index (PMI). Markets are expecting the US economy to showcase its resilience, especially for retail sales, which are hoping to rebound following February’s slump.

However, any data announcement that undershoots market expectations will be seen as a threat that will weigh negatively on the Dollar Index.

Given the Federal Reserve’s already dovish tone, further hints of a steeper slowdown in the US economy could hasten speculation of a Fed rate cut and may give Dollar bears reason to break the Greenback’s recent resilience around the 97 mark.