Today’s Key Market Drivers: 10th October 2018

“Pound jumps on another Brexit rumour.”

Bond markets reopened on Tuesday after Monday’s Columbus Day Holiday and immediately the US 10 Year Treasury yield rallied again and touched a 7 year high of 3.261%. This sent stock index futures sharply lower but as the trading day unfolded we saw the yield on the 10-year drift back lower to close at 3.208%. Stocks began to rally off their lows as the yield moved lower and demand for the US Dollar fell and subsequently many of the cross currencies made solid gains against the greenback including the AUD, NZD, EUR and Pound.

Tuesday saw the Chinese Yuan steady after the Shanghai stock index fell 3.7% on Monday and this helped the Aussie and Kiwi Dollars off their recent lows. The downtrend on both the AUD v USD and NZD v USD have resumed in recent days and it’s only a matter of time before the AUD v USD is back under 0.70c.

Rumours were running hot on Tuesday that the UK was again close to striking a Brexit deal with the European Union and traders were quick to buy back into the Queen’s currency. I point out in my daily video update today that the Pound v US Dollar is stuck in a trading range but once a Brexit deal is done the Pound in my view will likely rally strongly and it won’t be just a short relief rally.

In my view, the rally could be sustained and run well into 2019 with the UK and European interest rates also set to rise over the next 18 months. The rumour was that a Brexit deal may be announced on Monday and any deal between the two parties is likely to rally, not just the Pound but the Euro also. This would likely mean more downward pressure on the US Dollar and would take the spotlight away from US bond markets. Don’t hold your breath on a Brexit deal, we’ve heard these rumours before and there is plenty of water to go under the bridge until the deadline of March 19, 2019.

The economic calendar shows a bunch of Medium impacting news scheduled for today which will kick off with a Consumer Confidence report out of Australia. The European session has UK Trade Balance, Industrial Production and Manufacturing figures as well as a monthly GDP figure. If the data out of the UK beats estimates it may give traders another reason to dip more toes in the water and buy the Pound. The Pound’s rally post a Brexit deal will be lengthy and to try and time a trade around a Brexit announcement without a valid technical entry would be foolish. There will be plenty of opportunities to buy the Pound in the coming 12 months.

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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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