Senior Market Analyst at FXTM, Lukman Otunuga, has said economic indices in the financial arena will shift focus this week as inflation figures from major economies, including United States, China, Germany, and Nigeria return to key data across the globe
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Putting a spotlight on Nigeria, Otunuga said although inflationary pressures have been cooling, latest figures for October jumped to 33.4 per cent from 32.7 in September.
The spike, he said, may be the result of fuel hikes and flooding in the northern part of the country , which has apparently affected the harvest season.
Otunuga said Central Bank of Nigeria has been on a mission to support the naira and attract investment using aggressive monetary policy.
He said interest rates were raised by 50 basis points to 27.25 per cent in September, marking its fifth consecutive hike in 2024.
He said: ”Should the naira show signs of stabilising, annual inflation could peak in the final quarter of this year.”
Otunuga predicted a volatile week for United States dollar: ”Outside of Nigeria, our attention falls on the US Dollar Index (DXY), which could be rattled by key U.S data and Fed speeches, including Jerome Powell.
“Besides, it would be a crime to overlook the index after its aggressively bullish reaction to Trump’s U.S. election win. Prices jumped almost two per cent last week Wednesday on the “Trump trade” before giving back post-election gains as the pound and yen gained.
“The DXY tracks the dollar’s performance against a basket of six different G10 currencies, including Euro, British pound, Japanese yen, and Canadian dollar. With all said, the DXY could see more price swings.”
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Otunuga noted October U.S Consumer Price Index (CPI) report to be published on Wednesday could impact Fed cut expectations around lower U.S interest rates in December and beyond.
On forecasting of markets, Otunuga said CPI year-on-year October 2024 vs. October 2023 rose 2.6 per cent from 2.4 per cent in the prior month.
”Core CPI year-on-year to remain unchanged at 3.3 per cent. CPI month-on-month October 2024 vs September 2024 to remain unchanged at 0.2 per cent . Core CPI month-on-month to remain unchanged at 0.3 per cent .
“Headline and core CPI inflation is expected to remain unchanged at 0.2 per cent and 0.3 per cent Month on Month in October, but the year-over-year headline number is expected to rise 2.6 per cent from 2.4 per cent .Further evidence of cooling price pressures may support the case for another rate cut in December.
Traders are currently pricing in a 65 per cent probability of another 25-basis point rate cut by the end of 2024.
“A softer-than-expected US CPI report has the potential to drag the DXY lower. Should the CPI report beat market forecasts, the DXY could push higher.
Oil tumbled last Friday after Chinese stimulus measures disappointed investor expectations. Brent shed roughly 1.6 per cent last week as renewed concerns about demand in China and uncertainty over the impacts of Trump’s presidency weighed on the global commodity.
“Last week, we discussed how Trump’s victory may pressure oil – possibly hitting oil producing nations like Nigeria. His return to the White House could result in higher domestic oil production while potential tariffs on China may impact global demand.
“This combination of rising supply and falling demand could enforce fresh pressures on oil which is down four percent since the start of 2024.
“Should oil prices continue to weaken, this could be a threat to countries who acquire a chunk of their revenues from oil sales.”