Today’s Key Market Drivers – 12th October 2017

The US Fed monthly minutes were released at 5am Sydney time this morning. The minutes reported that the US economy is likely strong enough to withstand higher interest rates and the market should expect the Fed to raise the official cash rate again in December provided inflation data doesn’t weaken. Stats show futures traders are pricing in an 88% chance the Fed raises rates in December. The US Fed, in my opinion, would have moved sooner on another rate hike but inflation has stayed below the Fed’s desired target. The latest inflation data for the US is due on Friday and if it’s better than the market expects then the US Dollar will benefit from the news. The greenback has been moving higher off its yearly lows for over a month with strong economic data figures and the prospect Trump’s policy agenda may begin to gain traction. I remain a fan of the US Dollar against the Aussie and Kiwi Dollars and emerging market currencies in Asia.

The Euro’s upward momentum continued on Wednesday as tensions between Catalonia and Madrid eased and leaders sit down for talks over coming weeks. Traders are beginning to buy back into the Euro currency expecting the ECB to taper its stimulus program before Xmas. The Pound followed the Euro along for the ride on Wednesday as Theresa May’s political woes and Brexit concerns eased. The Yen fell as traders saw no reason to buy the safe haven currency as major US stock indexes continue to make new all-time highs. The Yen is the ultimate fear trade and will rise in value when stock markets fall.

The economic calendar today shows an important inflation expectation report due for Australia. If the report shows inflation in Australia is rising or falling faster than economists expect then we will see a sudden spike or fall in the value of the local currency. Currency traders are frankly more concerned however with Friday’s US inflation figures and any economic data between now and 11.30pm AEDT Friday night isn’t likely going to grab headlines in a significant way. It’s been a lackluster week for price action but I’ve been trading long enough to know some decent price action is only just around the corner when we least expect it.

 

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 key-note 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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