Oil, Balance of Trade and Naira in focus   


08 June 2020


Investors have stormed into the trading week with a renewed sense of confidence after last Friday’s US jobs report fuelled hopes that the worst of the coronavirus chaos could be behind us.

 

The United States created 2.5 million jobs in May, smashing the market expectations of -8 million while the unemployment rate dropped by -13.3% compared to the -20% forecast. With average hourly earnings printing at -1% month-on-month, below the 1% estimate, the report was somewhat encouraging and suggested that the US economy was trying to get back on its feet. However, the devil is in the detail. Considering how there have been downward revisions of more than -1/2 million to previous two months and government subsidies are responsible for much of the rehiring, the recovered jobs remain at risk.

 

Markets seem to be looking beyond this and riding on the optimism and this continues to be reflected in equity and currency markets and emerging markets.

 

Speaking of emerging markets, the Nigerian economy was thrown a lifeline after oil prices stabilized on economic recovery hopes and extended production cuts by OPEC +. With Brent crude trading back above $40, the increase in export earnings and foreign exchange reserves may provide more ammunition for the Central Bank of Nigeria to defend the Naira. Should Oil prices continue to appreciate in the week ahead, this may support the Naira and slightly soothe concerns over the country’s fragile economic outlook. On the data front, all eyes will be on the latest balance of trade figures for which is expected to show trade surplus hitting NGN 100 billion in March 2020.

 

Outside of Nigeria, expect global sentiment to be influenced by recovery hopes, economic fundamentals, rising equity markets and commodity prices. As we approach the second half of 2020, the key question is whether the monetary bazooka’s by central banks and fiscal government timebombs were enough to quell the negative impacts of the coronavirus to the global economy.


Source : Lukman Otunuga, Senior Research Analyst at FXTM


Reporting for EasyKobo on Monday , 08 June 2020 in Lagos, Nigeria


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