The Nigerian Naira maintained stability against the Dollar on Thursday despite growing expectations over higher US interest rates this year.
It is becoming clear that that the Central Bank of Nigeria’s repeated intervention in the FX market has resulted in a stable Naira exchange. Although this method could continue supporting the local currency, Nigeria’s external reserves may come under pressure.
Sentiment towards the Nigerian economy could take a hit if Friday’s foreign exchange reserves report shows that external reserves dropped further in August.
Risk sentiment wavers on trade fears
Market players remain in a cautious mood as lingering concerns over trade tensions between the United States and China dent risk appetite.
Asian stocks relinquished earlier gains to close in negative territory this morning while European shares declined as simmering trade tensions prompted investors to offload riskier assets.
With Donald Trump’s upcoming tariffs on $200 billion worth of Chinese goods likely to deteriorate US-China economic ties even further, resumed fears over trade remains a driving concern for investors.
Sterling boosted by Barnier, bulls capture 1.3000
The Pound experienced a sudden change of fortune after encouraging comments from Brexit negotiator, Michel Barnier, eased fears of a “hard Brexit”.
Bernier’s comments that the European Union was “prepared to offer a partnership with Britain such as has never been with any other third party country” has made music to the ears of Pound traders.
This positive development has boosted confidence over the direction of Brexit talks. The Pound’s aggressive appreciation following Barnier’s comments continues to highlight how the currency remains extremely sensitive to positive Brexit headlines.
Focusing on the technical picture, the GBPUSD is turning increasingly bullish on the daily charts. There have been consistently higher highs and higher lows created since the middle of August while prices are trading above the daily 20 Simple Moving Average. A weekly close above 1.3000 could seal the deal for bulls for prices to attack 1.3070 and 1.3130, respectively. If 1.3000 proves a stubborn resistance, Sterling could sink back to 1.2900.
South African Rand tumbles as Argentina Peso slides
The South African Rand has received another battering during trading on Thursday with the currency being hit from multiple directions.
The resumption of what very much could become another crisis for the Turkish Lira complimented by the Argentine Peso situation taking another dive for the worse, combined by prolonged concerns over trade tensions between the United States and China, is spelling out to investors a very reluctant environment for them to invest in high-yielding assets.
I would keep a very close eye on the situation with the currencies of Argentina and Turkey because it represents a major risk to deterring traders away from investing in any high-yielding assets, meaning that the situation for the South African Rand could get a lot worse due to external headwinds.
Commodity spotlight – Gold
Gold’s trajectory continues to be heavily influenced by the Dollar’s performance and US interest rate hike expectations.
The yellow metal depreciated today after reports of US economic growth expanding faster than expected during Q2 cemented market expectations of a US interest rate hike in September. With the Dollar likely to stabilize on Fed rate hike speculation and safe-haven demand, Gold could resume the downtrend.
In regards to the technical picture, the yellow metal needs to break back below the $1,200 level for bears to attack $1,190 and $1,182, respectively. If the $1,200 support holds, then prices could retest $1,214.