Today’s Key Market Drivers – 14th September 2017

The US Dollar continued to gain strength on Wednesday as traders attempt to buy the recent lows after the greenback was sold heavily over the past two months. The latest US inflation figures due today will be the key to whether or not the US Dollar continues to attempt to break the down trend and head back higher. The US Fed is eager to continue to raise the official cash rate but will not do so until there is an uptick in inflation. The next meeting of the US Central Bank is next week so if today’s inflation data beat the market’s estimates expect to see further gains on the US Dollar. The opposite is true if inflation data misses’ economist’s estimates. Today’s US inflation figures are due at 10.30pm AEST so expect to see an increase in volatility on currency markets at this time. Why do I say currency markets and not just the US Dollar? Because financial markets are very correlated and there are so many algorithm trading systems that trigger when volatility increases and this causes other currencies to often move even when the news is not directly related to them.

After the better than expected inflation figures on Tuesday rallied the Pound, Wednesday’s miss on wages data saw the Pound give back some of those gains. Economists expected average weekly earnings for the past 3 months (annualised) to have grown 2.3% but the data showed weekly earnings only grew 2.1%. The official unemployment rate dropped to 4.3% from 4.4% but the Bank of England is more concerned with wages growth than the unemployment rate so many traders who were long the Pound took profit prior to the Bank of England’s September statement today. The BOE will not adjust the official cash rate from 0.5% today however what traders will be looking for is any forward guidance in the statement or press conference with Mark Carney that indicates what the BOE may do in the coming 6 to 9 months. Keep in mind the BOE also issues the minutes of its September meeting on the same day it releases its statement. It also releases the committee’s voting card on who voted for a rate hike and who voted to leave rates on hold. Why is this important? If the majority still vote to keep rates on hold but there was an increase in the number of committee members voting for a rate hike, traders will see this as a potential shift in the committee’s general sentiment and thus more committee members may vote to lift rates in future months. An increase in the number of committee members voting for a rate hike would likely see the Pound supported post the statement released today. The BOE Governor’s comments in his press conference I believe will be more important than the statement itself as the press will be able to ask questions and the details traders are looking for are often in Governor Carney’s answers. Did you know Mark Carney is actually a Canadian and is the only foreigner ever to be the Governor of the Bank of England? The Bank of England is the oldest Central Bank in the world, established in 1694 and its cash reserves total 565 billion pounds.

The Aussie Dollar will be kept busy today with the latest official unemployment report due at 11.30am AEST. This will be followed by China Industrial Production numbers at midday, which, if out of line with expectation will move the Aussie Dollar also. The European trading session will be dominated by the Bank of England’s statement and the US trading session being dominated by the latest US inflation figures.

 

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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