Today’s Key Market Drivers – 15th September 2017

The Pound rallied strongly on Thursday after the Bank of England told the market that the official cash rate will likely rise in coming months. The BOE said that a hike is likely needed in coming months due to an improved economy and inflation pushing higher. The BOE surprised markets with its hawkish comments and this is why the rally on the Pound was so swift. The committee voted 7-2 to keep rates on hold however it is clear from the statement that interest rates will likely rise before Xmas and I expect the upward trend on the Pound to continue as trader’s price in higher interest rates. The UK’s long-term cash rate at the Central Bank is usually around the same levels as the RBA in Australia. Currently, the BOE is 0.5% and the RBA is 1.5%. I expect the GBP v AUD to rally in the coming 6 months.

Traders appeared transfixed on buying the Pound on Thursday and failed to hit the buy button on the US Dollar even after a better than expected inflation report was released. US Inflation annualised for August came in at 1.9% just 1 tick higher than economists expected and I would have expected traders to buy more US Dollars than they did. The BOE stole their thunder.

The Aussie Dollar got a boost Thursday morning after a better than expected monthly jobs report. 54,200 new jobs were created in the month of August vs the 20,000 economists expected. The official unemployment rate remained 5.6% but the AUD spiked higher as traders priced in the chances of a lower unemployment rate in coming months. The RBA is widely expected to lift the official cash rate by mid-2018 and any pullback on the AUD v NZD I believe will be met with some buyers. The rally on the AUD on Thursday was met with some immediate selling pressure following weaker than expected Industrial Production numbers out of China. So, it was a short term move up and a quick move back lower. Longer term, however, I think the local currency will be reasonably well supported against the Kiwi Dollar.

There was a spike higher this morning around 9.00am AEST on global safe haven assets such as the Yen and Swiss Franc as news wires lit up with the news that North Korea had fired another missile. You can see by looking at your charts the volatility the news created, however, the move higher on the Yen and Swiss Franc was short lived, which indicates that the market isn’t seeing anything “new” with North Korea. Just more missile launches and so long as they don’t land in a US alias backyard they won’t likely rock financial markets.

Looking at the economic calendar today US Retails Sales will be closely eyed but frankly the Bank of England and North Korea’s missile launch today will steal the headlines.

 

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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