Today’s Key Market Drivers: 13th February 2019
It was a “risk-on” trading session on Wall street.
Two pieces of fundamental news drove US stock markets higher and sent safe-haven currencies lower on Tuesday.
Firstly, news that Democrats and Republicans have agreed to a funding bill for Trump’s border which will avoid another potential Government shut down in coming weeks.
What also put traders in a buying mood was news that positive progress between the US and China on trade appears gaining momentum. US officials are currently in Beijing in discussions with their Chinese counterparts attempting to thrash out a trade deal that will avoid more tariffs kicking in on Chinese imports on March 1st.
The outcome of these negotiations will be crucial for the medium-term direction of currencies and stock markets. A positive outcome is going to benefit emerging market currencies and the AUD and NZD and a negative outcome would send safe haven currencies higher and stocks lower.
You will see on your charts this morning that the EUR v USD is higher and this has more to do with the fact the US Dollar is lower. Traders have been buying US Dollars as the China / US trade tensions escalated and therefore a simmering of tensions is going to see those long positions unwound. In fact, all of the major base currencies that trade against the US Dollar are higher this morning.
RBNZ to keep rates steady at 1.75%.
The RBNZ is expected to keep rates steady at 1.75% when it releases its February statement today, however, traders are expecting the Central Bank to acknowledge that global growth is likely to slow and they may need to lower their growth and inflation outlook.
The market has already priced in much of this expectation particularly after a weaker than expected Kiwi jobs report last week. The market will jump on any commentary that is out of line with what would be considered “expected”.
For example, the RBNZ remains upbeat about the local economy’s prospects (not likely but possible) traders would buy the Kiwi Dollar. If the RBNZ delivers a more subdued dovish statement downgrading its economic outlook further than economists expect and suggest the next move on rates could be lower the Kiwi Dollar would be sold off quickly.
You can learn a lot about the fundamentals of the FX market by reading and watching how price reacts after key economic data numbers.
3 things you must be able to do to trade successfully.
- You have to be able to manage risk consistently well.
- You need a strategy that can keep you in the game. Strategies that have stood the test of time and can withstand economic data numbers each day.
- You need to build up your willpower and discipline because it will not be anywhere near where it needs to be when you start trading.
Which one of the above is the most important? Put your answer on the Train With Andrew Facebook page.
Inflation data for the UK and USA will be closely eyed today.
Inflation is the culmination of a ton of other economic data all coming together to tell us if an economy is getting more or less competitive. It’s arguably the most important economic gauge Central Banks use to determine if they are going to put interest rates up, down or leave them on hold. If inflation is rising this means an economy is becoming more competitive and in time the Central Bank will likely be forced to move the interest rate higher if inflation continues to pick up. The opposite is true if inflation is falling.
Today sees the release of UK and US inflation data and with the Bank of England recently downgrading its economic outlook for 2019 and 4th quarter GDP missing estimates by some margin I would expect to see a subdued inflation report today. The market expects inflation in the UK to be 2% annually when the figures are released today and if it is less than the expected 2%, traders will likely short the Pound in response. US inflation is expected to be 1.5% annually which is down from the last inflation reading of 1.9%.
It’s a mistake to think you need to trade more than once or twice a month.
The more you trade the less you will make. That is a fact I have learnt coaching and guiding over 4000 FX traders over the last 10 years.
“But the price is moving AB and we should take advantage of it.”
“If I don’t take lots of trades, how can I possibly make money?”
These are comments I have heard hundreds of times but the reality is you need to take a sniper approach when investing. Whether its stocks, FX, gold, oil, futures, whatever market you are trading you will always do better over time trading less than trading more.
You will be able to manage risk better, you will be able to manage your emotions better, you will have less chance of a major drawdown and you will be able to trade with a clear, calm and decisive approach. Ready. Aim. Fire. Trade like a sniper, not a like duck hunter.
Be Relentless. 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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