Today’s Key Market Drivers – 10th August 2017

The RBNZ released its latest monetary policy statement at 7.00am AEST today leaving the official cash rate on hold at 1.75%. The Kiwi Dollar spiked higher moments after the statement was released due to the fact there was no “new” news about forward guidance on the official cash rate. The market had no reason to sell the Kiwi Dollar off.

The statement this morning concluded with the final paragraph. “ Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.” The last RBNZ statement in June also concluded with “ Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.” Nothing new and a carbon copy final paragraph from the RBNZ. There is still the potential for the RBNZ to lower the official cash rate but there is no reason to price in the expectation of higher rates in the coming 12 months either. On hold for the balance of 2017 is the likely scenario. If you would like to read the RBNZ statement please click on the following link.

http://www.rbnz.govt.nz/news/2017/08/official-cash-rate-unchanged-at-1-75-percent

With little in the way of high impacting economic news the markets focus on Wednesday was on North Korea and the threat it poses from its continued development of nuclear weapons. Recent comments from both the US and North Korean leaders sent stock index markets lower and safe haven currencies higher. The Aussie and Kiwi currencies hold no safe haven status and if the North Korean dispute ratchets up then both currencies will be sold against the US Dollar, which is the next safe haven currency behind the Swiss Franc and Japanese Yen.

I am willing to bet recent history will repeat and an actual hostile act between North Korea and the rest of the world won’t eventuate. For financial markets to significantly sell off more than a war of words is going to have to take place, I am talking about real military action. So, therefore, any rally by safe have currencies in my view is likely short lived provided the North Koreans don’t fire a missile south. I certainly can’t see the USA being the first to take action, doing so risks being the antagonist and I am sure it would rather be the defender in this case. The North Koreans attacking first would mean the end of the current regime, as the rest of the world would ensure it pays a severe price for putting on a fight that just doesn’t need to be put on. China doesn’t want regime change in North Korea because that would result in the US and its alias controlling more of Asia so it will be doing whatever it can to keep the North Koreans from taking any military action.

Looking ahead today there is a slew of medium impacting news most of it out of the UK that isn’t likely to grab headlines but has the potential to move the Pound if outside market expectations. US CPI data is the next piece of high impacting news that is due on Friday.

 

About the Author: Andrew Barnett

Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts, and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular key-note speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).

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