Today’s Key Market Drivers: 15th April 2019
Euro rallies as traders speculate about a major European company take over.
The Euro rallied strongly on Friday on the back of rumours a Japanese company had received approval from a foreign bank to purchase a major European aviation finance business. Details of the deal are sketchy but if the deal proceeds it would be a positive sign business confidence is returning to the Euro Area.
The Euro had a positive week last week rallying off its March lows thanks to risk sentiment returning which has seen stocks rise sharply and safe haven demand for currencies such as the Yen and Swiss Franc fade. The US Dollar is also considered to be a safe haven currency and it too was sharply lower against the Aussie and Kiwi Dollars on Friday. China trade data showed exports strongly rebounded last month and this also helped boost the AUD and NZD against most of their major rivals.
A number of investment bank analysts believe the Euro is cheap at current levels and their expectation is given the market’s mood it will likely continue to move higher this week.
US earnings seasons kicks off strongly and will be a focus.
First quarter 2019 company earnings season has just begun in the USA with the world’s largest investment bank JP Morgan’s first quarter profits beating market expectations. This helped support a positive trading day on Wall Street on Friday and gave traders a reason why to ignore buying safe-haven assets such as the USD, JPY or CHF.
The S&P 500 is less than 40 points away from its 2018 high and if company earnings continue to impress there is no reason why US stock markets can’t break to new all-time highs. Interest rates won’t be going higher in the US in 2019 and they certainly won’t be going higher here in Australia. A low-interest rate environment is good news for stock market traders and I expect the local stock market to have a positive year in 2019 with RBA and RBNZ official interest rates to go lower which will likely support blue chip stocks that pay dividends.
Brexit risks are over for now.
The British Pound has been well supported since the EU extended the Brexit deadline until October and provided we don’t see continued political instability and stock markets remain positive the Pound will likely continue to steadily rally. The UK economy is doing far better than its European neighbours and whilst it is unlikely the Bank of England will adjust interest rates in 2019 the expectation is the next move will be up rather than down.
The week ahead.
The first piece of high impacting economic data that has the potential to impact currency prices is the RBA April monthly minutes on Tuesday. UK unemployment and wages numbers along with a Euro Area Sentiment survey will be the focus in the European trading session on the same day.
Wednesday sees important inflation numbers for New Zealand released with the market expecting a lower reading of 1.7% vs the previous 1.9%. The RBNZ in its last statement said the next rate move for New Zealand was likely down and if the inflation reading does come in weaker than expected it will highly likely see traders sell off the Kiwi Dollar. Wednesday also sees the release of 1st Quarter China GDP figures which traders are expecting to show the world’s second-largest economy is still continuing to slow. If this is the case depending on how weak China’s growth numbers are, they have the potential to reverse the recent rally on the Aussie and Kiwi Dollars. Longer term my expectation is the AUD and NZD will continue to trend lower against the US Dollar simply because I expect more money to leave Australia and New Zealand as expectations grow interest rates will go lower down under.
Thursday sees Australia’s unemployment figures released and with an election only just around the corner the incumbent government is looking for a positive reading. My expectation is they won’t get it and I am predicting the official unemployment rate to rise in April which will only add further selling pressure to the local currency which I expect will retrace back lower this week. Any sharp rallies on the AUD and NZD will likely be viewed by professional traders as selling opportunities in my opinion.
Canadian and Japanese inflation data is set for release in the back half of the week as well as US Trade Balance and Retail Sales numbers. Whilst there are no official Central Bank statements due this week there is plenty of other economic data to keep currency markets busy.
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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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