Today’s Key Market Drivers: 16th August 2019
Markets always overreact and Wednesday’s fall was no exception.
Human being’s fear and greed is what drives financial markets and Wednesday’s 800-point fall on the Dow Jones index, the biggest one day fall in 2019 was a complete overreaction to a bond market event that is so far from reality at present it’s rather laughable.
Financial markets have a tendency to overreact and I warn you not to chase price when markets are super volatile because you will highly likely dust your money. Brokers love it when markets get volatile because novice retail traders get sucked into price swings and they always are seduced to trade, chase price and lose their money.
Euro gets battered after stronger than expected US data.
The Euro was smashed lower on Thursday for two reasons.
- The better than expected US economic data help boost demand for the US Dollar and as the EUR v USD is the #1 most actively traded currency pair by volume any rally on the US Dollar is always likely to dampen demand for the Euro.
- Yesterday in my video report to clients, I said that the Euro looked weak technically and if a break to the downside occurred selling pressure would likely come in strong.
The US economy is doing just fine.
If you believe what the headlines in the past few days are saying the US economy is headed for a recession and the US Fed will be forced to lower interest rates in September as the stock market falls out of bed along with the economy. What a load of balderdash! The US economy is doing just fine, the jobs market remains robust and the American consumer who makes up 2/3’s of the US economy is still ticking along nicely. Thursday’s official US Retail Sales data showed a far better than expected number with a jump of 0.7% in spending in July which was far better than the 0.3% the market expected. Two additional business index numbers released on Thursday also showed better than expected activity and once again left economists red faced.
I don’t believe the US Fed will drop rates in September as the vast majority of so-called experts suggest they will. The Fed was very specific last month when it dropped the official cash rate by 0.25% that the cut was a mid-cycle move and gave no indication whatsoever that further rate cuts are coming. The Fed will remain data dependent and the data is still pointing to a strong US economy albeit a “freaking out” bond market that in my view has it all wrong and will be proved so next month.
Fed Fund Futures have a rate cut in September 100% priced in so if the Fed doesn’t drop rates at its next meeting then the US Dollar is likely to spike back higher along with US Bond Yields.
Join me at 1.00pm AEST today for Money Exchange on the Train With Andrew YouTube Channel.
Yesterday’s wages index number met economists estimates at 2.3% and failed to move the Aussie Dollar through the Asian trading session. Today at 11.30am we will get the July jobs numbers and official unemployment rate which is expected to stay at 5.2%.
Today at 1.00pm AEST Live on the Train With Andrew YouTube channel I will once again be hosting Money Exchange. It may not have the expensive Sky News set however the content will be just as strong and I am confident you will enjoy spending 30 minutes (maybe 45) with me Live. This week on the show.
- All the latest high impacting FX news that you need to know.
- What are investment banks and hedge funds saying this week?
- A Hot Technical and Fundamental Tips.
- A Train With Andrew merchandise giveaway.
- Plus, your questions answered.
If you are not sure how to log onto the Train With Andrew YouTube channel follow these instructions.
- Go to www.youtube.com
- Type in the Search bar Train With Andrew (must use spaces, do not type trainwithandrew)
- You will see the channel pop up, hit subscribe (it’s free) and I will appear live at 1.00pm AEST.
If you cannot join Money Exchange live today don’t worry the show will immediately upload as a video before 2.00pm and you can watch it in your own time.
Australia creates 41,000 jobs in the month of July.
Just when economists and commentators were suggesting a weaker jobs market in Australia is likely the July jobs figures showed a surprising number of jobs created in July. The Aussie Dollar jumped higher on the news that 41,000 new jobs were created. The stronger jobs number was not enough to shift the stubbornly high unemployment rate from 5.2% and when you consider the Kiwis Unemployment rate is now 3.9%, apparently, (I’m suss) and the USA is 3.7%, Australia’s 5.2% looks high. And it is!
The RBA will drop rates again before Xmas and I continue to hold the view that the official RBA cash rate will be 0% by the end of the current financial year. Why do I hold this view? Because Governor Lowe has already forecast its possibility and in all the years I have been watching the RBA every time they make such comments they are forecasting their likely intentions.
I may have egg on my face this time next week. But I like eggs.
Next Wednesday will see the release of the US Federal Reserve’s monthly minutes which will give us the ability to read what was discussed behind closed doors at the last Federal Reserve meeting. It is these Minutes that I believe will remind traders that the US Fed’s rate cut on July 31st is not the start of a rate cut cycle and I also believe the Fed Fund Futures that are pricing in a 100% chance of a cut in September will drop. This would put upward pressure on the US Dollar and send the Aussie and Kiwi Dollars as well as all its major rivals back lower.
More US data today.
Another US economic sentiment survey will be released today which will likely show the economy remains sound and robust. The University of Michigan Sentiment Survey is simply a telephone survey of 500 US consumers that are asked a series of questions. The survey has been conducted every month since the 1940s.
Would you like to take the survey now? Here is a link to the questions you would be asked.
Did you know that your strongest muscle and worst enemy are the same things. Your mind.
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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