Today’s Key Market Drivers: 10th June 2019
It’s “risk on” everywhere as trader’s price in lower rates at the US Fed.
US stock market’s continued to surge higher as the market’s sentiment turned ever hotter on Friday. Safe haven currencies continued to be sold as traders turned their attention to buying back into emerging market currencies and the Aussie and Kiwi Dollars.
Lower interest rates at the US Federal Reserve is going to mean the stock market rally is set to continue. Between 2008 and 2016 the US stock market rallied more than 150% as the official cash rate remained at 0%. The current US Fed rate is 2.5% and if we see a recession in the coming two years and the Fed drops rates back to 1% or lower the initial market reaction may be negative but longer-term lower interest rates provides a great environment to buy quality blue-chip stocks.
US May jobs report misses estimates by a mile.
The hotly anticipated May US jobs report was a big miss with only 75,000 jobs being created vs the 185,000 expected. It appears the private ADP report was a decent guide last week and traders saw the jobs number as another sign the US economy is weakening faster than many predicted and we will likely see lower rates at the Fed before October. Average hourly earnings fell whilst the official unemployment rate remained steady at 3.6%.
The US Dollar continued to be sold down following the May jobs data.
Canadian Dollar surges on stellar employment numbers.
Traders took advantage of a weak US Dollar and bought up the Canadian Dollar following far better than expected employment numbers for Canada. Friday’s data showed 27,000 jobs were created in the month of May compared to the expected 5,000. The official unemployment rate dropped sharply to 5.4% from 5.7% and average hourly earnings jumped by 2.6% on an annualised basis for May.
The market has a positive Mexican trade deal priced in.
Futures markets have already likely priced in a positive conclusion to the US and Mexico trade talks. A trade deal has reportedly been done that will avoid the 5% trade tariffs Trump threatened to impose 10 days ago. Here in the US, the press has been reporting over the weekend a deal has been reached between the two countries but the US was quick to remind the market trade tariffs will take effect if Mexico doesn’t live up to the deal agreed upon.
In the deal, the Mexicans agreed to bring in the National Guard to crack down on Central Americans using Mexico as a human highway in an attempt to enter the United States.
It is my view the positive news about the tariffs being avoided was priced in by traders late last week and whilst it may be mentioned on the news the impact will be limited on currency markets.
In other news.
This week shapes up with a slow start with respect to the economic calendar with the first real high impacting news items being China and US Inflation figures on Wednesday. I expect the market will remain bullish in the first few trading sessions unless we have an unforeseen event occur or an unexpected Tariff Tweet from Trump about who may be next in the firing line.
Don’t trust everything you see. Even salt looks like sugar.
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 keynote 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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