Lukman OtunugaStill, concerns over the health of the world’s largest economy linger with investors on high alert ahead of another busy week. With the US elections just months away, this negative development adds another layer of uncertainty. Much focus will be on the US CPI print, retail sales, and consumer confidence which are likely to shape expectations around how aggressively the Fed cuts rates.
Regarding the fourth largest economy in Africa, the main theme will be the latest CPI print. One of the key themes in Nigeria in 2024 has been runaway inflation which jumped to 34.2% in June – its highest level since 1996. However, the incoming CPI print is expected to show prices slowing in July, cooling to 33.2% compared to 34.2% in the previous month. Given the CBN’s aggressive approach towards raising rates, signs of cooling price pressures will be a breath of fresh air for consumers. It is worth noting that the Central Bank of Nigeria has raised rates by a whopping 800 basis points in 2024.
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Looking beyond inflation, the next key event will be GDP published later this month. After expanding 3% in Q1, it will be interesting to see whether growth can be maintained in Q2. In the FX space, the Naira continues to gain against the dollar on the official exchange with the spot rate at N1,589 as of Monday.
Regarding oil, it has extended its first weekly gain since early July thanks to geopolitical tensions in the Middle East. Rising oil prices may have a positive knock-on effect on the economy, especially when factoring how a major chunk of revenues is acquired from oil sales. However, this could be cancelled out by the rising cost of fuel imports which is costing Nigeria $600 million per month.
Still, this is set to be another big week for the global commodity due to the monthly outlook from the International Energy Agency. Talking technical, Brent has gained over 4% since the start of 2024 with prices trading above $80 as of writing. Key levels of interest can be found at $7, $82 and $82.80.
Lukman Otunuga is Senior Financial Market Analyst with FXTM
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