Today’s Key Market Drivers: 11th June 2019
Trump agrees to suspend trade tariffs on Mexico but ramps up more pressure on China.
The market expected it and President Trump confirmed it on Monday. The US Government has suspended any plans it had to impose 5% tariffs on Mexican imports saying Mexico had agreed to stronger immigration enforcement on its southern border to stop illegal migrants crossing into Mexico and attempting to make their way north and into the USA.
Whilst the USA and Mexico appear to have struck a deal Donald Trump is keeping the pressure squarely on China saying on Monday that unless President Xi of China attends the G20 summit in Japan later this month the US would immediately implement another $300 billion of tariffs on China imports.
I personally don’t see why Trump needs to make such a comment about Xi not attending the G20 summit. It would be highly unlikely a world leader such as the President of China would skip a G20 meeting so close to home.
Financial markets remain risk on early in the week.
The market’s mood continues to be “risk on” although the US Dollar did stage a relief rally on Monday following news of the Mexican / US immigration deal to avoid any trade tariffs.
I urge you not to fall in love with the US Dollar’s Monday rally as Wednesday’s inflation data has the potential to deflate any recent rise in price. It will only take one weak US economic data number for the market to once again sell off the US Dollar. Along with US inflation figures, the market this week will get to digest May US Retail Sales and a Michigan Sentiment survey which are both high impacting data numbers.
Pound struggles after weaker than expected GDP figures.
The Queen’s currency struggled to gain any momentum on Monday following weaker than expected April GDP figures. Whilst it was only a monthly growth number (not as important as GDP measured over a quarter) the -0.4% figure was enough for traders to remain on the sidelines and refrain from heavy long Pound positions.
I suspect until the UK finalises its new leader and the market has some confidence they will get a Brexit deal done the Pound will likely struggle behind other currencies that have a clearer political and economic picture.
Traders have no reason to quit buying stocks.
Global stock markets gapped up on Monday and the US trading session continued the positive momentum that was built in the back half of last week. There is no reason for hedge funds and investment banks to sell down stocks at present, in fact, I suspect over coming quarters the US stock market will make all time new highs and push back the safe haven Yen and Swiss Franc. It won’t be a straight line up but the simple fact is this. Lower interest rates will highly likely mean higher stock prices if the Fed does what the market expects it to do.
Markets will heat up from Wednesday onward.
The market has only Medium impacting news to engage with until Wednesday when a slew of high impacting numbers will get the market’s attention. US Inflation data is the big one the market wants to see as inflation is the cumulative impact of all other economic indicators. If US inflation is beginning to fall this will only put more downward pressure on US bond yields and subsequently the US Dollar. Traders will push up stocks and further price in the expectation the US Fed is closer to its first rate cut in close to 10 years.
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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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