Today’s Key Market Drivers: 13th June 2019
US Inflation data meets estimates as traders continue to call for a Fed rate cut in July.
US monthly inflation data released on Wednesday showed a reading of 0.1% which was in line with what the market expected but continues to point towards the potential for a US economic slow down in coming quarters. Whilst the inflation number did not disappoint to the downside it was weak enough for traders on Wall Street (where I was today) to call for a US Fed rate cut next month. Hedge Fund billionaire Paul Tudor Jones expects the Fed to cut rates in coming months and thinks the stock market will continue to rally.
Financial markets remained reasonably muted post the inflation reading not really know what to do. The US Dollar did dip and stocks rallied immediately post the inflation number but the price action retraced quickly and US stock indexes closed slightly lower.
The price action we are seeing on the Yen looks normal to me.
The base currencies that trade against the Yen have together started a move to the upside in a new trending direction and whilst I never fall in love with a directional move the pull back in the last 24 hours on most of the base currencies that trade against the Yen is what I call a natural price cycle in the market as a new trending direction develops.
There was no major reason for the safe havens to be bought back today, the economic data didn’t support it and I doubt investment banks and hedge funds have switched gears again and are willing to push them to new lows. Unless we see a larger pullback on stock indexes or some unforeseen news the current trend reversal higher and positive risk on trading sentiment should prevail over the medium term.
I will warn you that you should always trade with the expectation of a surprise from time to time. Yesterday I got a nasty surprise with one of my stock portfolio positions when the stock I hold had a profit downgrade and the price opened substantially lower than my stop loss. That hurt, but it happens from time to time and it’s all part of the game. What I don’t do is worry about and get anxious about things I can’t control and I focus all my energy on what I can control and most of that has to do with managing my overall risk exposure.
Trump moves markets again with another tweet.
Trump was at it again on Wednesday this time threatening to impose tariffs on Russia’s gas pipeline and warned Germany against being dependent on Russia for its energy.
The Euro sagged after Trump’s tweet and along with the Pound remained weak against the US Dollar. The Pound was arguably the biggest loser falling sharply after UK lawmakers defeated an attempt led by the opposition Labour Party to try to block a no-deal Brexit.
Crude Oil prices keep commodity-rich currencies in check.
The Aussie Dollar and other commodity-rich currencies took a hit on Wednesday following a 4% fall in the price of oil. Larger than expected US crude inventory levels and an expectation of a global economic slow down have forced the price of Oil to a 5-month low and this was the primary fundamental reason why the Aussie, Kiwi and emerging market currencies were sold off.
Aussie unemployment rate remains steady at 5.2%.
Australia created 42,000 jobs in the month of May and the Australian unemployment rate remained steady at 5.2% vs the 5.1% the market expected. The Aussie Dollars immediate reaction was to fall as traders expected the unemployment rate to have fallen.
Traders have fully priced in the likelihood of another rate cut at the RBA in coming months and therefore any downside move may be limited particularly if investment banks and hedge funds continue to price in the expectation of lower rates in the USA.
We must never call someone a hero without first understanding what a true hero really is.
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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