Today’s Key Market Drivers: 11th February 2019

Aussie & Kiwi Dollars remains under pressure.

As I expected, the continued sell-off on the AUD and NZD against the US Dollar was not as severe on Friday but certainly, both remain under pressure and I expect will ultimately move lower.

The RBA Governor’s comments at the National Press Club on Wednesday sent the AUD sharply lower whilst New Zealand’s spike in the official unemployment rate sent the Kiwi Dollar falling out of bed on Thursday.

The RBNZ will this week release its February statement and it will be expected the Central Bank will confirm the probability of lower growth and inflation in coming quarters. If they do confirm this the Kiwi Dollar will likely be sold off further as traders will price in the expectation the next move from the RBNZ may be down and not up.

The RBNZ’s official February statement is released on Wednesday morning so expect to see increased volatility throughout the day.

Euro continues to lose ground as economic data points to a slowdown.

The Euro continues to decline under the weight of weak economic data after the ECB quit its stimulus support in December for the largest economic region in the world.

For years, The European Central Bank was printing cash and buying bonds of cash strapped countries such as Greece, Spain and Portugal and in December 2018 signalled to the market that the Euro Area had recovered sufficiently for it to cease this support. Since doing so the economic data each week has continued to deteriorate with a constant stream of weaker than expected data numbers.

I expected the Euro would perform well against the greenback in 2019 mainly on the back of a weaker US Dollar and stable but slightly weaker growth in Europe. That hasn’t happened yet and the Euro Area’s economic slide will be a major concern to the ECB that still has its official interest rate at 0% 10 years on from the GFC.

China markets closed for Chinese New Year.

Financial markets across Asia will see volumes slip this week as China welcomes the year of the Pig according to their Zodiac. I have never found that Chinese New Year has impacted currency markets and I don’t expect this week to be any different. Happy New Year to all our Chinese members.

What’s going to drive currency markets this week?

It appears to me the stock market is looking frothy again and a pullback may be imminent and if so, the safe haven currencies will do well this week. With Trump and Xi not likely to meet before the tariff truce deadline of March 1st, traders may get nervous and we could see a week or two of risk-off trading. The S&P 500 is hovering just above its 200 EMA on the daily chart and a solid close back below this level will certainly attract some sellers.

From an economic data perspective, it’s a week jam-packed with high impacting news with UK GDP kicking things off today and then official UK inflation figures Tuesday. Throw in Brexit negotiations and the Pound is going to be busy. We will also get US official inflation figures, Japanese, Euro Area and German GDP so before Friday we will have a great snapshot of the overall state of global growth and inflation. US Retail Sales and China inflation round out the week along with a closely eyed US sentiment survey.

Remember if an economic data announcement misses the market’s expectations traders are going to short the currency and the opposite if it beats expectations.

Winning in life is a habit. So is losing. AB

 

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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