Today’s Key Market Drivers: 12th August 2019
Risk sentiment turns positive. But for how long? That was my opening headline in Friday’s GoldRock Insider Report where I eluded to the likelihood of the market turning on its heels in coming days and heading back south.
It was President Trump turning stock markets bearish which in turn drove the safe-haven Yen and Swiss Franc higher. After imposing another 10% tariffs on $300 Billion of China imports on Monday last week President Trump spooked financial markets on Friday saying his administration was not ready to strike a deal with the Chinese even though he says they are willing to do a deal.
The market will highly likely kick off the week flat or to the downside and there is no high impacting economic data today that will grab the markets attention. The focus will be on the Yuan v US Dollar fixing and if the Chinese allow their currency to trade below the key 7 level.
UK GDP misses estimates and drives the Pound to new lows.
The British Pound simply cannot catch a break. It’s continuing to weaken, constantly being weighed down by Brexit concerns and now weaker than expected economic data. Friday saw a negative growth number print for the second quarter of 2019 which has given traders more reason to believe the Bank of England will lower the official interest rate in coming months.
RBA Governor confirms they are ready to take alternative action if needed.
Speaking in Canberra on Friday RBA Governor Lowe told politicians that the Reserve Bank of Australia was prepared and ready to continue to lower interest rates and it is possible we could see the official cash rate at 0% in the coming 12 months. He also said the RBA may be forced to adopt unconventional monetary policy measures to support the economy. Most of Governor Lowe’s comments were already priced into the AUD so there were not any major spikes lower after his dovish comments.
This Thursday we will get the latest unemployment numbers with economists expecting the official jobless rate in Australia to remain unchanged at 5.2% and around 14,000 jobs to have been created. If the jobless rate jumps higher and fewer Aussies are finding work then sellers are going to go for the AUD once again.
US CPI to be closely eyed.
Tuesday’s reading of the latest US inflation figures has the potential to send the US Dollar higher and stock markets lower if it beats estimates. Many traders are expecting the US Fed to lower the official US interest rate again in coming quarters and inflation is the number one barometer a Central Bank will watch in determining when to adjust interest rates higher or lower. Economic data and US company earnings have been doing reasonably well throughout 2019 and whilst the US Fed is predicting weaker inflation later in the year Tuesday’s CPI reading will give us a good gauge on how the economy is performing. Every time economists publish reports about the impending weakness in the US economy the data released proves them wrong.
If the Inflation reading on Tuesday beats estimates the US Dollar will rally and if it comes underestimates the US Dollar will weaken. The opposite is true for stocks. If inflation is strong interest rates get raised and therefore fixed interest returns rise and traders sell riskier stocks to take advantage of a higher fixed interest return. This is why the stock market fell very sharply in November last year because the market was fearing higher interest rates in December 2018 (which occurred) and throughout 2019.
Goldman Sachs cuts US growth forecasts.
On Sunday, the world’s second-largest bank Goldman Sachs published a report to its clients saying it predicts slower US growth in the fourth quarter blaming ongoing trade tensions between the US and China. What was most surprising to me was their comment that they did not see the US and China doing a trade deal before the 2020 US Presidential election.
I highly recommend www.cnbc.com as a great source of financial market content. (unpaid plug)
You may not be able to control where the price is going next. But you can control how you react to any situation and that is where your power lies as a trader also.
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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