It is official, the UK economy
has entered a recession for the first time in 11 years.
Economic growth during the second
quarter was abysmal, plunging 20.4% after a 2.2% fall in the first three months
of 2020. This was the largest recession on record and worst GDP seen in Western
Europe. To rub salt into the wound, data released earlier in the week revealed
an estimated one million jobs had already been erased during the coronavirus
induced lockdown.
The current recession in the
United Kingdom will certainly have negative impacts on bilateral trade between
Nigeria and the United Kingdom. A possible spillover effect on Nigeria amid a
reduction in trade and investment could enforce further pressure on the country
which already entangled in a fierce battle against COVID-19.
As we move deeper into the third
quarter of 2020, the outlook for Nigeria will remain influenced by not only the
coronavirus developments but Oil prices and implementation of the revised 2020
budget of N10.81trillion.
Given how the economic calendar
for Nigeria is void of Tier 1 economic releases this week, expect the Naira to
be impacted by Dollar shortages and local stocks to remain influenced by
domestic risks.
COMMODITY SPOTLIGHT – GOLD
It has been a wild week for Gold.
The precious metal experienced
some hefty profit taking with prices plunging as low as $1863 yesterday before
rebounding back above $1900. With US 10-year Treasury yield jumping the highest
level since early July, this dented some of Gold’s allure.
However, the outlook for Gold
remains bullish, with this current pullback potentially opening the path to
fresh all-time highs as fundamentals stimulate appetite for the metal. Looking
at the technical picture, a weekly close above $1900 could signal further upside
in the medium term.
For those who like to look at
Gold on the shorter timeframe, keep a close eye on how prices react around the
$1900 psychological level on the H4 charts. Weakness below this level could
trigger a decline towards $1870.
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