Today’s Key Market Drivers: 10th October 2019
The image and headline is from CNBC.com at 9.30am AEDT.
The Yen was lower after rumours surfaced that China is willing to cut a partial trade deal. The China Post just had other things to say.
Financial markets were in a risk-on mood on Wednesday following reports that China is prepared to concede and buy more US agriculture and do a partial trade deal with the USA. Official talks do not start until Thursday in the US however traders took the rumour and ran with it sending the Yen lower and US stock indexes sharply higher.
I caution you and remind traders that we have seen this sort of optimism before only to be disappointed with the US and China piling on more tariffs. (I wrote the above remark at 6.45am and look what has happened.) Financial markets are starting to put a few too many eggs in one basket if you ask me and I am not convinced the upcoming trade talks will conclude with a successful trade deal the market will like.
Keep in mind the US and China could announce some sort of half-baked trade deal the market looks at and says. “That’s not a genuine trade deal,” and sells off very sharply. So, don’t just think that a trade deal if announced will be seen as good news. The market also has to like it.
US Fed Minutes show the committee is watching inflation closely.
The Minutes from the latest US Federal Reserve meeting were released on Wednesday and showed the committee made the decision to lower interest rates in September due to the potential for lower inflation in coming quarters. The Minutes did not give any clear forward guidance on future rate cuts, however, they did show the committee thought the market was over-optimistic about further rate cuts at the Fed.
The latest US inflation data is due today and if out of line with expectations will give traders a reason to buy up or sell off the greenback in the very short term. Inflation remains the #1 barometer for a Central Bank when it comes to interest rates. A lower than expected inflation reading today would likely see traders sell off the US Dollar.
Pound could capitulate at any moment.”
The British Pound as I write is sitting at it’s monthly low and could capitulate lower and trigger a bunch of stop-loss orders that will be sitting just under current pricing levels. Brexit negotiations remain at a standstill, at least that’s what it seems with neither the EU or UK giving any positive indications a deal is any chance of being done before October 31st.
It is more and more likely Boris Johnson is going to have to plead for more time which means another Brexit date extension. I doubt the market will see that as good news and therefore the Pound in my view is likely to see lower levels in coming days and weeks unless a miracle deal eventuates, which is now highly unlikely.
What would you do if you had $100 million to trade with this week?
The US / China trade talks are about to begin, the result of the trade talks will likely cause significant volatility in financial markets. If I was working as a trader at an investment bank or hedge fund, I would have access to a Bloomberg terminal and receive any important news from the trade talks well before the average retail trader. This gives me a small head start to get set in a trade to take advantage of any positive or negative news that comes from the trade talks. The follow-through orders from other large players trading the same direction will be swift and the US / China trade talks are the biggest event the market has to play with this week and the result will likely hangover into price action next week also.
Do I want to take the risk and place a position in the market now, before any conclusion from the trade talks or am I better off waiting for the news to break post the talks and place my next trade then?
This is the sort of question you need to be asking yourself. If you are to make meaningful returns trading your money in the FX market then you need to be riding the coattails of investment banks and hedge funds and they aren’t likely to trade big numbers in the FX market until they get some news out of the trade talks or there is some unexpected news in the very short term.
Thousands of traders will be placing trades in the next 48 hours with little or no consideration to the US / China trade talks or how investment banks and hedge funds will likely trade the outcomes and how price volatility will work.
Who is likely going to make more money in the coming days? The retail punting trader, or the trader inside the investment bank or hedge fund? Who would you bet on? The answer is obvious.
If you want to give yourself the best chance of success, you will improve your odds significantly by simply learning how to wait.
Nobody made a difference by being like everyone else.
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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